The US dollar has stayed muted against the Japanese yen currency as the FX market remains quiet at the end of the week after a sell-off started to take place at the start of the week.
Certainly, traders of the Japanese yen currency could be mindful of the Bank of Japan policy meeting next week and then the following week’s Federal Reserve interest rate decision.
Earlier today Japanese CPI inflation data was released. On a monthly basis, consumer prices rose by 0.3% in March, shifting from a 0.6% fall in February.
Also, the annual inflation rate in Japan inched lower to 3.2% in March 2023 from 3.3% in the previous month. This was the lowest point since last September as transport costs rose the least in 6 months.
The speculation is that the BOJ will not raise rates, and especially after deputy governor Uchida has said the Bank will not be telegraphing monetary policy moves ahead of meetings, leaving two-way speculation in the market.
More temporary upside in the USDJPY pair is likely if the Fed pulls away from the pivot narrative as suggested by some Fed speakers. In such a scenario the USDJPY pair could easily hit higher levels.
The key thing to watch this week is that the trend remains long-term bearish while the price trades under the 137.00 level. However, while the price holds above the 132.00 level it could be said that buying corrections in the USDJPY pair is the preferred way forward.
According to the ActivTrader Market Sentiment tool some 52% of traders are bearish towards the USDJPY pair and the other 48% are bullish, which strongly hints that we could see range trading.
With retail traders or participants are neutral we did see some fairly sizable price moves on Monday for a market that is supposed to be range bound.
USDJPY Short-Term Technical Analysis
Technical analysis on the four-hour time frame shows that the USDJPY pair continues to hold above the Ichimoku Cloud and is close to turned short-term bullish above its 200-period moving average.
According to the location of the 200-period moving average then a break under the 132.00 level should be considered extremely bearish for the USDJPY pair.
USDJPY Medium-Term Technical Analysis
The daily time frame is showing that the USDJPY pair has formed a large a large head and shoulders style pattern. These are amongst the most reliable bearish reversal patterns, and it has been invalidated.
According to Ichimoku analysis the price is working its way towards the Ichimoku Cloud. Better to wait for a trend change of the price moves past the 137.00 level or an activation of the head and shoulders pattern below the 131.00 level.