Japanese Yen stumbles as US Dollar strengthens

• USD/JPY rebounds to test session highs near 159.50, recovering the bulk of a sharp pullback.
• Wednesday's initial USD/JPY slip in reaction to the CPI print has faded.
• Attention turns to Thursday's PPI, where a sharp expected slowdown in core prices could test the Dollar's mettle.

USD/JPY is back around the mid-159.00s area, testing the day's highs after rebounding sharply from a low around the 158.60 level.

The move tracks a broader shift in the Greenback rather than anything Yen-specific, as Wednesday's US Consumer Price Index (CPI) printed in-line with forecasts and initially pressured the Greenback, denting rate-hike bets, but that reaction has since reversed. The US Dollar Index (DXY) is now firmer in the session.

On Thursday, the US Producer Price Index (PPI) is due, with expectations that core wholesale prices will slow sharply on an annual basis. A soft print would fit the disinflation narrative and could cap the Dollar's rebound, while a hotter number would reinforce the recovery already underway.

Short-term technical analysis:

On the 4-hour chart, USD/JPY trades at 159.47, retaining a bullish near-term bias as it holds above the 20-period Simple Moving Average (SMA) at 158.90 and a dense cluster of horizontal supports between 159.09 and 159.22. The pair is advancing toward nearby resistance at 159.54, while the 100-period SMA at 160.65 remains a broader topside cap. The Relative Strength Index (RSI) at 61 shows firm bullish momentum but not overbought conditions, suggesting scope for an extension of the rebound while these supports underpin the price.

On the downside, initial support is located at the 159.22/159.09 zone, ahead of the dynamic floor from the 20-period SMA at 158.90 and the prior horizontal level at 158.68. On the topside, a break above the immediate barrier at 159.54 would open the way toward the 100-period SMA at 160.65, where stronger supply could emerge and temper further gains.

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