Japanese Yen flirts with two-week low vs USD after CPI report, ahead of BoJ

• USD/JPY regains positive traction as the JPY weakens after Japan’s CPI report for August.
• Expectations of a more hawkish BoJ might hold back JPY bears from placing fresh bets.
• Softer US bond yields undermine the USD and further contribute to capping spot prices.

The USD/JPY pair attracts fresh buyers during the Asian session on Friday and currently trades above the 156.00 mark, near a two-week high as traders await the outcome of a two-day Bank of Japan (BoJ) meeting.

The Japanese Yen (JPY) weakens a bit after data released from Japan showed that the headline Consumer Price Index (CPI) held steady at 1.9% YoY, while the core inflation unexpectedly eased to 1.7% in August. Moreover, the core CPI, which excludes both fresh food and energy prices, remained below the central bank's 2% target, tempering expectations of a more hawkish BoJ and providing a modest lift to the USD/JPY pair.

Nevertheless, traders are still pricing in a greater chance of a follow-through up move in December after the widely expected BoJ rate hike this Friday. Hence, BoJ Governor Kazuo Ueda's comments during the post-meeting press conference will be scrutinized regarding the precise timing and pace of future tightening. The outlook, in turn, will play a key role in driving the JPY and provide a fresh impetus to the USD/JPY pair.

Meanwhile, Federal Reserve (Fed) Chair Kevin Warsh’s focus on inflation calmed the recent selloff in the fixed-income market, dragging US bond yields away from multi-year highs. This keeps US Dollar bulls on the back foot, which, in turn, might keep a lid on any further upside for the USD/JPY pair heading into the key central bank event. Spot prices, however, seem poised to register gains for the first time in three weeks.

USD/JPY 4-hour chart

Technical Analysis

The USD/JPY pair maintains a capped tone below the 100-period Simple Moving Average (SMA) on the 4-hour chart and the 50.0% Fibonacci retracement. The cluster of overhead levels suggests rallies are vulnerable to selling interest while the recent bounce off lower levels looks more like consolidation within a broader corrective phase than a decisive bullish continuation.

Meanwhile, initial resistance is seen at the 100-period SMA at 156.44, followed closely by the 50.0% retracement at 156.60, while further barriers align at the 61.8% level at 157.48 and then 158.74 and 160.35. On the downside, immediate support is located at the 38.2% Fibo. retracement at 155.71, ahead of the 23.6% level at 154.62, with a deeper bearish extension pointing toward the structural anchor around 152.85.

(The technical analysis of this story was written with the help of an AI tool. Know more.)