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The U.S. is about to print its inflation numbers!

What are traders expecting and how can the release affect USD/JPY’s downtrend?

Before moving on, ICYMI, yesterday’s watchlist looked at AUD/CHF’s uptrend after Australia printed better-than-expected data. Be sure to check out if it’s still a valid play!

And now for the headlines that rocked the markets in the last trading sessions:

Fresh Market Headlines & Economic Data:

EIA shows surprise 19 million barrel increase in U.S. crude stock build after winter storm

New Zealand’s townhouses, apartments drive 3.2% y/y increase in building consents in November

Japanese media: BOJ to review side-effects of massive easing at next week’s meeting

Japan’s bank lending up by 2.7% y/y in December

Australia trade surplus unexpectedly grew from 12.74B AUD to 13.20B AUD as imports declined in November

China’s consumer inflation accelerated from 1.6% to 1.8% y/y in Dec; PPI slowed from 1.3% to 0.7% y/y on soft demand

Stocks hold on to gains ahead of U.S. inflation test

Gold firms as dollar eases ahead of U.S. inflation data

Upcoming Potential Catalysts on the Forex Economic Calendar:

FOMC member Harker to give a speech in Pennsylvania at 12:30 pm GMT
U.S. inflation reports at 1:30 pm GMT
U.S. initial jobless claims at 1:30 pm GMT
U.S. federal budget balance at 7:00 pm GMT
China’s trade balance scheduled during the Asian session

Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️

What to Watch: USD/JPY

USD/JPY 4-hour Forex Chart

USD/JPY 4-hour Forex Chart by TradingView

In a few hours we’ll see just how much consumer prices have risen in the U.S. in December.

Markets are pricing in a softer growth of 6.6% than December’s annual growth of 7.1%. That would mark the SIXTH consecutive monthly slowdown for consumer prices!

The deceleration of consumer prices just might convince Fed members to take the pedal off the tightening metal. Not good for USD/JPY bulls, who are already dealing with the prospect of the Bank of Japan (BOJ) moving away from its dovish programs.

A weaker-than-expected CPI release could extend today’s slide and drag USD/JPY below a range support on the 4-hour time frame. The pair could revisit its 129.50 lows or even make new 2023 lows in the next trading sessions.

A surprisingly strong CPI, on the other hand, would support the Fed members’ statements about staying hawkish all through the year.

USD-friendly headlines may push USD/JPY from the current inflection point and bump it back up to a trend line resistance or the 134.50 zone where the 200 SMA and range resistance levels are.