The USDJPY is rallying amid yesterday's release of the January Consumer Price Index for All Urban Consumers, surpassing economists' expectations of "softer" inflationary figures and increasing global geopolitical tensions. The most awaited CPI report brings disappointment to those anticipating a decline in inflation, which would have enabled the Fed to initiate rate cuts before long. Traders will monitor the currency pair closely this week due to significant economic data releases and their potential impact on currency valuations.
Overview
The USDJPY is rallying amid yesterday's release of the January Consumer Price Index for All Urban Consumers, surpassing economists' expectations of "softer" inflationary figures and increasing global geopolitical tensions. The most awaited CPI report brings disappointment to those anticipating a decline in inflation, which would have enabled the Fed to initiate rate cuts before long. Traders will monitor the currency pair closely this week due to significant economic data releases and their potential impact on currency valuations.
Upcoming Economic Events
Thursday 13:30 (GMT): US Retail Sales
Thursday 13:30 (GMT): Empire State Manufacturing Index
Thursday 13:30 (GMT): Unemployment Claims
Thursday 23:50 (GMT): Japan Gross Domestic Product
Friday 13:30 (GMT): Producer Price Index
Friday 15:00 (GMT): Preliminary UoM Consumer Sentiment
Technical Analysis
The USDJPY has been following an upward trajectory since January 11, when prices broke through the key resistance level at 145.975, setting the stage for higher exchange rates. Since then, the currency pair has undergone a significant increase, marking a departure from its twenty-two-week low of 140.248. Both the 50-period Moving Average and the Momentum Oscillator are in agreement with the bullish outlook. More specifically, prices are trading above the Moving Average line, indicating an upward bias where the Momentum Oscillator surged above its 100 baseline, supporting the bullish scenario. Although prices are currently maintaining levels above both indicators, there is a notable negative divergence between the Momentum Oscillator and price. This divergence introduces a degree of uncertainty, sending mixed signals to market participants for a potential correction to the downside.
Potential Upside Targets
Should the bullish momentum continue to dominate the market, there are three potential upside targets that traders may consider:
151.908: The first target stands at 151.908, aligning with the peak established on November 13.
154.246: The second price objective is estimated at 154.246, representing the 4.236% Fibonacci extension linked to the swing, formed by the peak at 145.975 and the trough at 143.419, respectively.
156.231: An additional potential price objective could be identified at 156.231, representing a resistance estimated using the 423.6% Fibonacci extension drawn from the peak at 148.335 down to the trough at 145.895.
Conclusion and Considerations
Investor interest in the market increased as yesterday's release of more-than-expected consumer figures prompted a surge in buy orders, driving the US dollar to higher price levels. Continued bullish sentiment suggests a potential scenario of rising exchange rates, emphasizing the need for cautious monitoring and risk management in the volatile currency market. Additionally, staying informed about economic events and geopolitical developments will be essential in making informed trading decisions in the USDJPY market.