USDJPY Ticks Lower on Better Than Expected BOJ CPI Report; Tests Trend Line Resistance
For the first time since June 2019, the BOJ’s report on Japan’s core CPI topped expectations. The central bank’s report earlier today came in at 0.3% for February. It was only expected to show that prices of goods and services, excluding volatile items, would print at 0.2%. Consequently, the report had a bearish effect on USDJPY. The currency pair ticked slightly lower from 110.47 to 110.35 following its release.
The question is, will it be enough to keep the downtrend on USDJPY intact?
On the hourly time frame, we can see that the currency pair is testing a confluence of resistance around 110.50. For one, this price coincides with the falling trend line from connecting the highs of February 21 and February 24. When drawing the Fibonacci retracement tool from yesterday’s high to its intraday swing low, we also see that the 50% Fib level coincides with this price. The release candle completed an evening star candlestick pattern. In forex trading, this is often interpreted as a bearish confirmation signal. It may suggest that USDJPY could fall to yesterday’s lows below 109.90. If there are enough sellers in the market, it could trade lower to 109.60 where it previously found support.
On the other hand, it’s worth noting that USDJPY does not always react to Japanese data. A strong bullish close above today’s Asian session highs at 110.57 would invalidate the trend line resistance. It could then mean that USDJPY may soon trade higher to yesterday’s highs at 111.00.