USD/JPY Range Since Mid-July Persists Post-CPI

USD/JPY is trading slightly higher on Friday after oil prices and U.S. Treasury yields moved higher. Lower yields over the course of the week hampered the U.S. Dollar, while on the Japanese Yen’s side of the equation rumors of a forthcoming rate hike from the Bank of Japan have propped up the funding currency. The U.S.—Japan 2-year yield spread fell to its lowest level since May 2022 earlier this week.

In the above chart, USD/JPY rates have spent the past two months trading sideways between 146 and 149, but for a brief trip (failed bullish breakout) outside of the range at the end of July. Momentum is flat, with daily MACD hugging its signal line and Slow Stochastics in neither overbought nor oversold territory. Similarly, the rate of change for the exponential moving average (EMA) envelope (20-, 50-, and 200-days) shows little directional bias. While a longer-term bottom may be forming in USD/JPY rates, a drop below range support at 146 would likewise see the uptrend from the April, July and September lows break, signaling the resumption of the dollar downtrend.