Key Highlights
- The US Dollar started a major downside correction from the 114.50 resistance against the Japanese Yen.
- There was a break below a major bullish trend line with support at 113.55 on the 4-hours chart of USD/JPY.
- Recently in the US, the CPI posted an increase of 0.1% in Sep 2018 (MoM), less than the 0.2% forecast.
- Today, the US Import Price Index for Sep 2018 will be released, which is forecasted to increase 0.2% (MoM).
USDJPY Technical Analysis
After a major upward move, the US Dollar found resistance near 114.50-55 against the Japanese Yen. The USD/JPY pair started a downside correction and broke the key 113.00 and 112.80 supports.
Looking at the 4-hours chart, the pair trimmed most of its gains and broke the 50% Fib retracement level of the last major wave from the 110.38 low to 114.53 high. Moreover, there was a close below the 113.00 support and the 100 simple moving average (red, 4-hours).
To move into a bearish zone, there was a break below a major bullish trend line with support at 113.55 on the same chart. The pair tested the 112.00 support and later started consolidating losses.
At the outset, the pair is under pressure below the 113.00 level and a connecting bearish trend line on the same chart with resistance at 112.75.
As long as the pair is below 113.00, it could slide towards the 111.40 support and the 76.4% Fib retracement level of the last major wave from the 110.38 low to 114.53 high.
To start a fresh upward move, USD/JPY must settle above the 113.00 level and the 100 simple moving average (red, 4-hours).
Fundamentally, the US Consumer Price Index for Sep 2018 was released by the US Bureau of Labor Statistics. The market was looking for an increase of 0.2% in the CPI in Sep 2018 compared with the previous month.
However, the actual result was lower than the forecast as the CPI increased 0.1%. The yearly change was 2.3%, less than the forecast of 2.4% and also less than the last 2.7%. Looking at the CPI ex Food an energy, there was a rise of 2.2% (YoY), similar to the last reading.
The report added that:
The index for all items less food and energy rose 0.1 percent in September, the same increase as in August. The shelter index increased 0.2 percent, and the indexes for apparel, motor vehicle insurance, recreation, and airline fares also rose.
Overall, the US Dollar could correct further in the short term and pairs like EUR/USD and GBP/USD may recover.
Economic Releases to Watch Today
- German Consumer Price Index for Sep 2018 (YoY) – Forecast +2.3%, versus +2.3% previous.
- German Consumer Price Index for Sep 2018 (MoM) – Forecast +0.4%, versus +0.4% previous.
- US Import Price Index Sep 2018 (MoM) – Forecast +0.2%, versus -0.6% previous.
- US Export Price Index Sep 2018 (MoM) – Forecast +0.2%, versus -0.1% previous.
