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USD/JPY Retreats Below 147.50 as U.S. Inflation Sparks Dollar Selling
Traders' Opinions
Summary:
The U.S. dollar fell sharply against the Japanese yen on Thursday, retreating below 147.50 after U.S. inflation data reinforced expectations of prolonged monetary policy easing, with technical signals pointing to further near-term weakness before any potential rebound.
Sell
PENDINGUSDJPY
EXP
147.000
Entry Price
145.300
TP
148.300
SL
147.350 -0.296 -0.20%
--
Point
PENDING
145.300
TP
CLOSING
147.000
Entry Price
148.300
SL
The U.S. dollar suffered a sudden reversal against the Japanese yen on Thursday, giving up earlier gains after fresh U.S. inflation data prompted renewed selling pressure across the greenback. The move underscored fragile sentiment surrounding the Federal Reserve’s policy outlook and highlighted how quickly positioning can shift when traders recalibrate rate expectations.
After briefly climbing above the 148.00 handle in the Asian session, USD/JPY staged a dramatic U-turn and slipped into negative territory, falling as low as 147.35 by the European afternoon. The decline marked a 0.1% drop on the day, but the reversal carried more weight than the headline change, as the pair’s failure to hold above a psychologically important resistance level reignited bearish momentum.
The catalyst came from the U.S. Consumer Price Index (CPI) report for August, which showed annual inflation accelerating to 2.9% from 2.6% in July. While the data confirmed that price pressures remain sticky, markets interpreted the details as insufficient to alter expectations for rate cuts later this year. The Fed’s challenge remains balancing a steady disinflation trend with signs of cooling growth, and investors appeared convinced that policymakers will prioritize supporting the economy rather than risking overtightening.
The softer dollar response contrasted with earlier expectations that firmer inflation would provide support. Instead, Treasury yields slipped modestly, and rate-sensitive currencies like the yen gained ground. The shift reflects how markets are increasingly looking beyond headline inflation, focusing instead on the Fed’s broader narrative that restrictive policy has largely run its course.
Technical Analysis
From a technical perspective, the outlook for USD/JPY has tilted bearish in the short term. The pair’s retreat coincided with a break below a trendline near 147.40 on lower intraday charts, erasing the momentum built earlier this week. With the 50-day exponential moving average (EMA50) acting as overhead resistance, the probability of a sustained recovery appears limited in the near term.
Momentum oscillators add weight to the downside case. The Relative Strength Index (RSI), which had previously been hovering in overbought territory, has turned lower, signaling waning buying pressure and reinforcing the likelihood of further corrective moves. We are now eyeing the 146.80 zone as the next key support level. A decisive break below that threshold could open the door to deeper losses, though short-term rebounds remain possible as markets digest the inflation-driven move.
Still, medium-term bulls have not completely relinquished control. Should the pair find strong buying interest near 146.80, a recovery back toward the 149.00 region remains plausible. That level has served as a magnet for price action in recent weeks, with traders reluctant to push the yen significantly higher amid Japan’s ongoing ultra-loose monetary stance.
TRADE RECOMMENDATION
SELL USDJPY
ENTRY PRICE: 147.00
STOP LOSS: 148.30
TAKE PROFIT: 145.30
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