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USD/JPY Rallies, Tokyo CPI On Deck

Shain Vernier•Thursday, July 26, 2018•2 min read

The coming 24 hours will be big for the USD/JPY. A slew of economic releases are on the way from both sides of the Pacific, each having the potential to move pricing directionally. If you are a fan of wide ranges and breakout trading, then the coming hours in the USD/JPY will be right up your alley.

Tokyo CPI

Over the last few days, I have talked a lot about the importance of Friday’s U.S. GDP report. Without a doubt, volatility will spike, President Trump will light up Twitter, and the media will be whipped into a frenzy. However, when it comes to the USD/JPY, the Tokyo CPI metrics will get the first shot at moving the yen.

Here is a look at the expectations for the Tokyo CPI report due out during the U.S. overnight session:

Event                                                                     Projections          Previous

Tokyo CPI (YoY, July)                                                    0.5%                     0.6%

CPI except Food, Energy (YoY, July)                           0.4%                    0.4%

CPI except Fresh Food (YoY, July)                              0.7%                      0.7%

In total, inflation is expected to remain static for July. Forex players have been patiently waiting for the Bank of Japan (BoJ) to at least hint at tightening up the yen. They will most likely be kept waiting as Japanese inflation remains depressed.

USD/JPY Technicals

Following some early session weakness, the bulls have taken control of the USD/JPY. At press time, price is testing two key resistance levels on the daily time frame.

USD/JPY, Daily Chart
USD/JPY, Daily Chart

Here are the levels to watch for the remainder of the session:

  • Resistance(1): Daily SMA, 111.11
  • Resistance(2): Bollinger MP, 111.19
  • Resistance(3): 38% Current Wave Retracement, 111.57

Bottom Line: With static Japanese inflation and strong U.S. GDP expected, the bulls are eagerly awaiting their turn at this market. However, a short from beneath the 38% current wave retracement is an opportunity to capitalize on an overbought market in the short-term.

Sells from 111.49 with an initial stop at 111.76 produce 27 pips on a 1:1 risk vs reward ratio. With a bit of luck, this trade will go live later today, firmly ahead of the Tokyo CPI release.

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ABOUT THE AUTHOR See More
Shain Vernier
US Analyst
Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.
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