USD/JPY closes near monthly highs ahead of US PPI data

• The pair saw green for 4 consecutive days of gains and close near the 145.00 critical resistance.
• The Yen lost ground following Japan´s PPI data for July came in lower- than- expected.
• US soft inflation data for July capped the USD gains. Eyes on PPI figures on Friday.

At the end of Thursday’s session, the USD/JPY jumped to a monthly high and closed near the 144.80 area, seeing more than 0.40% of daily gains. This could be justified by disappointing Japan’s inflation figures released for July, which pressured the Yen, as investors placed dovish bets by the Bank of Japan (BoJ). On the US side, the weak Consumer Price Index figures from July capped the USD gains but traded resilient against its rivals. Investors await Producer Price Index (PPI) data from the US from July on Friday to have a better understanding of the inflation outlook of the US to place their bets on the next Federal Reserve (Fed) decisions.

After July’s headline CPI from the US decreased to 3.2% YoY and the Core measure to 4.7%, investors foresee PPI from the same month falling to 2.3%. In that sense, additional evidence of inflation decelerating may fuel more dovish bets on the USD and limit the pair’s upside momentum. 

However, on the Japanese side, July’s PPI advanced 0.1%, lower than the 0.2% expected. It’s worth mentioning that the BoJ express that as long as inflation doesn’t meet the bank’s forecast, they won’t leave their dovish stance, so monetary policy divergences may continue to pressure the JPY.

USD/JPY Levels to watch

Per the daily chart analysis, the USD/JPY has a bullish technical bias for the short term, with Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) residing in positive territory. The Relative Strength Index (RSI) also exhibits a northward slope above its midline, emphasising the presence of intense buying pressure. At the same time, the MACD, with its green bars, highlights the strengthening bullish momentum of the USD/JPY. Also, the pair is above the 20,100,200-day Simple Moving Average (SMAs), implying that the bulls retain control on a broader scale.

Support levels: 144.50, 144.00, 142.00.

Resistance levels: 145.00, 145.50, 146.00.

USD/JPY Daily chart