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*The Japanese yen has strengthened sharply, pushing USD/JPY toward the mid-153 area after a significant decline since last week. Today’s U.S. CPI is now the key near-term catalyst for the pair.
*A hotter-than-expected reading could revive Fed rate-hike expectations, widen the U.S.–Japan yield gap and trigger a corrective rebound in USD/JPY. A softer print would favour further yen strength.
*Beyond CPI, expectations for further BoJ policy normalisation will remain crucial for sustaining the yen’s gains.
The Japanese yen, which has demonstrated notable strength in recent sessions, now confronts its most significant near-term challenge as the U.S. Consumer Price Index release takes centre stage. The USD/JPY pair has declined substantially since last week, with the yen reaching multi-month highs against the dollar and consolidating near the mid-153 area after the sharp advance. Markets are closely focused on today’s inflation figures, widely regarded as the final major data point that will shape Federal Reserve rate expectations ahead of next week’s policy meeting.
A hotter-than-expected CPI reading would likely reinforce the case for a September rate increase by the Federal Reserve, potentially widening the interest-rate differential between the United States and Japan. Such an outcome could provide renewed support for the dollar and exert downside pressure on the yen, prompting a corrective rebound in USD/JPY from current levels. Conversely, a softer inflation print would reduce the probability of near-term Fed tightening, narrow the rate gap, and allow the recent selling pressure in the pair to extend. In that scenario, traders would turn their attention to the psychological support zone near 150.00, a level that has not been tested in the current move but could come into play if yen strength accelerates further.
Beyond the immediate reaction to the CPI data, the yen’s path will also remain influenced by expectations surrounding the Bank of Japan’s upcoming decision and any further signals on the pace of Japanese policy normalisation. In the near term, volatility is expected to rise as markets digest the inflation outcome and recalibrate rate differentials. The yen’s recent gains have been driven by a combination of hawkish BoJ repricing and positioning adjustments; whether those gains can be sustained now hinges largely on the U.S. data and its implications for the Federal Reserve’s next move.

USDJPY, H4:
The USD/JPY pair has found support above the 153.00 level after undergoing a significant sell-off, with the latest price action suggesting that selling pressure may be gradually easing. More importantly, USD/JPY successfully broke above its previous price-consolidation range in the latest session, providing an early signal that the short-term market structure may be shifting toward the bullish side. The breakout suggests that buyers are beginning to regain control, although the sustainability of the move will remain crucial in determining whether this develops into a genuine bullish trend reversal.
Should USD/JPY continue to hold firmly above the previous range-bound structure, the latest breakout would gain further confirmation and could strengthen the bullish trend-reversal view for the pair. Maintaining the breakout area as a new support zone would be particularly important, as it would indicate that the previous consolidation resistance has successfully transitioned into support.
With the bullish structure gaining traction, the next leg could see USD/JPY extend its recovery and challenge the next key liquidity zone near 156.00. A sustained move toward and potentially above this area would further reinforce the recovery and signal that the pair is continuing to build upward momentum following the previous significant sell-off.
Conversely, a failure to hold above the previous consolidation range could weaken the breakout signal and increase the risk of another technical pullback. Should the pair fall back into the former range, it would suggest that the latest breakout may have been a false breakout and that buyers have yet to establish sufficient control for a sustained trend reversal.
Resistance Levels: 155.60, 158.00
Support Levels: 153.00, 149.80
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