USD/JPY bulls may soon take the initiative – technical

Today there are two indicators of the U.S. economy – the core CPI for this month and initial jobless claims for the previous week (Unemployment Claims) coming out at once.

The CPI is longer-term indicator and therefore it is more significant for large investors – today, we will mainly focus on its dynamics. This indicator shows the percentage change in the price of products and services, excluding volatile components – food and electricity.

The CPI is a key inflation indicator, which is taken into account by the Fed while changing the base rate. Jobless Claims should be considered only if the Core CPI is at 0.1% according to forecasts. Then, in the case of reducing Unemployment Claims below 335K, we should expect the U.S. Dollar to strengthen.

If the Core CPI exceeds the forecast, we assume that this rate will also be decisive and expect a strengthening of the Dollar regardless of the Unemployment Claims statistics.

Update: No surprises from US inflation figures

Here we consider the technical situation for the USD/JPY. Rising daily support line and growing RSI(14) suggest that the bulls may soon take the initiative. This event must be preceded by the resistance at 55.639 breakthrough for RSI.

We should also wait for approach of the ParabolicSAR near the prices. However, there is every reason to believe that these events can take place at the intersection of the resistance level at 102.468. The nearest target is according the previous historic high (102.732), which is slightly below the 161.8 % Fibonacci level. The preliminary risk limitation is possible to be including immediate support – at the moment it meets the level 101.750.

We recommend placing a pending order to buy above 102.468, 15 minutes before the CPI when we have the situation confirmed by the indicators RSI and Parabolic. The order is kept only when the macroeconomic indicator exceeds the predicted value of 0.1%, or in case of decreasing the Unemployment Claims less than 335K when the CPI is constant. When you open your position the stop loss should be moved according to the ParabolicSAR. Note that in any case, the position should be kept not longer than six hours because the Philly Fed Manufacturing Index comes out at because at 16:00 (CET, server time). Conservative traders can switch positions into a breakeven state or close them 15 minutes prior to the release of this figure. Recall that you can put the position forced closing time by using the server timer. We also recommend to remove a pending order if the price crosses the near-term support not opening the order. This would mean that the trend has changed dramatically. Nevertheless, we believe this scenario is unlikely to be.  

More: Dollar yen forecast.

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