Daily Analysis USDJPY - 12 July 2023

The US Dollar Index (DXY) has continued its correction, nearing 101.37. Previously driven by the cautious market sentiment due to the Fed's tightening policies, it is now under pressure as expectations of only one more interest rate hike remains.

Looking ahead, there is anticipation for action ahead of the US Consumer Price Index (CPI) data for June. Analysts expect a significant decrease in monthly core CPI inflation to 0.2%, which would be welcomed by the Fed. Annualized core inflation is expected to decline to 4.9%, while headline inflation is projected at 3.1%, moving closer to the target.

Despite the Producer Price Index (PPI) figures for June falling short of estimates, the Japanese Yen has shown strength. Goods and services prices at factory gates contracted by 0.2% instead of expanding by 0.1% as expected. Annualized PPI has also decelerated to 4.1% compared to consensus and previous releases of 5.1%.

The USD/JPY correction turned into a continuous selloff, with the pair breaking through all support levels in the past four days. Currently, we are approaching the 139.00 level, which coincides with the current trend line on the daily chart. However, there is no guarantee that it will hold, as the solid historical level at 137.70 poses a potential barrier.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
142.00	141.20	140.22	139.00	137.70	136.00