The US CPI report is the next significant planned driver for the USD/JPY market. The price coiling may develop an inverted daily head and shoulders pattern.

The USD/JPY seeks to rise amid a light schedule in the North American session but has encountered offers as US equities soar to new weekly highs. As of this writing, the USD/JPY exchange rate is back to flat for the day at 132.35, having traded between a low of 132.06 and a high of 132.87 for Tuesday and the whole week.

Investors eagerly await the US consumer price index, which has impacted the US Dollar and US Treasury rates in the most recent hours. Wall Street’s major indices are bid as a result. The 10-year yield is now down 1.66% and is approaching a 3.563% hourly support structure. If this were to persist, it would provide some support for the dollar as well and fend off USD/JPY bearish, allowing the cross to maintain its current level until Thursday’s CPI data, when traders hope to learn more about the direction of the Federal Reserve’s rate hikes.

This is why TD Securities analysts said they expect core prices to have increased every month in December, “ending off the year on a comparatively better footing,” they added.

In fact, we anticipated a substantial 0.3% MoM rise as services inflation picked up steam. Because energy prices once again provided significant respite, we anticipate the headline CPI inflation to show a modest fall on an unrounded basis in December but to be rounded up to level MoM. According to our MoM predictions, core and headline CPI inflation likely slowed in December year-over-year.

Regarding the US dollar, the experts said, “USD rallies should be sold into until the core measure dramatically surprises to the upside.” Despite the USD being strategically stretched, the hurdles are too great to force a turnaround.

Technical analysis of USD/JPY

Following the analysis from before, USD/JPY Price Analysis: Bulls on the hunt, price coiling, consolidation towards US CPI, potential for an inverted daily head and shoulders:

Such a result, where an M-formation is in play, would break over the daily resistance and fit in with the bullish forecast for DXY as follows:

The price would be anticipated to move in for the retest of the resistance structures and the pattern’s neckline between 103.50 and 104.00 since the M-formation is a reversion pattern. Such a move would coincide with a 50% mean reversion at the extreme and a 38.2% Fibonacci retracement.