USDJPY – bulls are taking a breather; US inflation data in focus for fresh signals

Strong recovery rally from 107.31 (08 Sep low) has fully retraced 110.66/107.31 downleg on yesterday’s stretch to 110.70 and today’s renewed attack but was unable to break higher.
Today’s price action is consolidating below 110.70 barrier (reinforced by 55SMA) and awaiting the key release for the dollar today – US inflation data.
The release will be closely watched as CPI numbers will be good indication for the Fed in their attempts to hike interest rates once more in 2017.
Inflation is expected to tick higher to 0.3% in August after 0.1% print in July, with Core CPI forecasted at 0.2% in August, up from 0.1% the previous month.
Stubbornly low inflation is the main obstacle for the Fed’s rate hike plans, with stronger reading in August seen as supportive factor which would further boost the greenback.
As we mentioned in our previous reports, resistance at 110.66 may delay strong near-term bulls for consolidative / corrective phase which should be contained above psychological 110.00 support, also top of thick ascending daily cloud, to keep near-term bulls in play.
Positive US inflation numbers would inflate price for fresh upside and test of next strong barrier at 111.00 (base of thickening daily cloud).
Conversely, weaker than expected CPI would put the greenback under increased pressure for acceleration through 110.00 towards converged 10/20SMA’s at 109.46 and daily Tenkan-sen at 109.00.

Res: 110.70; 111.00; 111.48; 111.64
Sup: 110.35; 110.00; 109.46; 109.00