USD/JPY Recovering Daily Loss after US Core PCE report- will it hold?

USD/JPY Fundamental Analysis

During the early Asian Trading session, the forex currency pair was facing selling pressure amid the positive release of the annual Tokyo Core CPI. The figure surpassed the expectations of the market by 4.2% and reported a 4.3% growth in inflation. This report sparked hopes among investors that the Bank of Japan might phase out its economic stimulus to bring down inflation from 42 years-high levels.

Meanwhile, the US Dollar Index was gaining strength for the series of economic releases scheduled for the day. The US Core PCE Price Index and Personal Income for December came in line with the expectations of 0.3% and 0.2%, respectively. However, Personal Spending fell short of expectations and dropped to -0.2%.
The Pending Home Sales and UoM Consumer Sentiment will be released within a few hours, which will also impact USD prices. The US Dollar Index rose +0.22% within 24 hours and kept the losses in USD/JPY capped for the day.

USD/JPY Technical Analysis

USD/JPY Technical Analysis

The overall trend is down according to this technical chart. But it seems like momentum is lower. Any break below 128 will renew the bearish trend. At the same time, any break above the 131 mark could reverse the trend to the upside.
MACD histogram appearing below the red signal line suggests a minor uptrend. The stochastic Oscillator confirms this signal with the blue signal line moving above the red dotted line near the oversold territory. The consolidated movement of USD/JPY in the previous 6 hours shows impending volatility and indecisive participants in the market. It could be mainly because of the focus on the US PCE report.

In a bullish scenario, the price moving past 50-SMA (pink line) towards the 130 mark could mean a higher presence of buyers in the market. The first upside resistance at 130.20, followed by the next R2 at 130.629, is probable. Furthermore, there will be a potential bullish rally after the break of the third resistance level (R3) at the 131 mark.
On the other hand, the bearish scenario on the H1 chart suggests that a sustainable move below the 129.62 (S1) level will signal higher sellers in the market. The next support level (S2) is 129.04. Any break below this could trigger a downside acceleration towards the psychological S3 level at 128.328.

USD/JPY Daily Technical Levels


Pivot Point: 129.95

Courage is like a muscle. We strengthen it by use.

Ruth Gordo