The USDJPY marginally extended its bearish run for the day after disappointing US CPI data. According to the Bureau of Labour Statistics, monthly CPI for January 2020 was 0.1%, which was less than both the market expectation and previous figure of 0.2%. Core CPI came in at 0.2%; same as consensus figures. Annualized data for the US CPI (all items) registered at its highest 12-month level of 2.5%, while the US Core CPI (CPI on items excluding energy) remained at 2.3%; the same as before.
Earlier today, the Japanese Yen had gained against the US Dollar after a change in diagnostic mechanisms by the Chinese authorities increased the number of new coronavirus cases remarkably and sparked renewed aversion towards risky assets. The US CPI results support the intraday price outlook for the USDJPY, which is marginally lower at 109.777.
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Technical Outlook for USDJPY
Most of the price movement for this pair in the last two months has been driven purely by risk-off/risk-on sentiment that is linked to the coronavirus outbreak. The constant switch in outlook is manifesting in this week’s price action, which has been relatively muted with small bullish candles interspersed with bearish ones. This leaves price constrained within the ascending channel.
With today’s bearish price action, the USDJPY could retest the 109.704 support level. A break below this level opens the door for an attempt at a retest of 109.30 and possibly 108.42, although a move towards the lower of these two targets must contend with the support presented by the channel’s lower border. A move to 107.82 definitively breaks down the channel, with further bearish implications that may see price even target 106.64.
On the flip side, a recovery in price could be on the cards should price fail to break below 109.77. This opens the door towards 110.58. The descending trendline that forms the upper border of the long-term symmetrical triangle found on the monthly chart may present itself as a further resistance. 111.95 and 114.06 are upside targets that will only come into the picture when the triangle’s upper border is broken.