The USD/JPY dropped in the early New York session following a drop in the key inflation metric used by the Fed in determining monetary policy.
The Core PCE Price fell from 0.7% to 0.5% on a monthly basis. As a result, the USD/JPY fell 0.28% on the day.
Ever since the FOMC’s hawkish statement of 16 June, several Fed members, including Chairman Jerome Powell, have retraced their steps on aspects of the rate statement. In particular, there has been a lot of emphasis on playing down inflation is being transitory. The latest result seems to provide the backup needed to affirm their positions.
The data have eased inflation fears, and the greenback is now seeing fresh offers.
The active candle’s pullback move resulted from rejection at the 110.97 resistance, a previous high on 31 March.
This pullback is now targeting the 110.28 support (4 June high; 22 June low). A further decline below this support brings the price into conflict with the channel’s lower border at the 109.70 price mark. If this border gives way, the currency pair targets 109.31 and the price wall at 108.46/108.81 along the way.
On the other hand, bulls would be looking for a bounce that extends the upside towards the 112.07 resistance, thus forming a higher high that signals the resumption of the uptrend. The 27 March 2020 low at 111.68 forms an intervening pitstop.
