Whale are swimming down on USDJPY

USD/JPY pair, there have been reports that the Japanese government is considering appointing Kazuo Ueda as the next Governor of the Bank of Japan (BoJ), which initially caused a bout of volatility in the market. However, after Ueda stated that the current policy is appropriate and the need to continue with an easy policy, the impact faded and the pair rebounded from the 129.80 region. The USD continues to receive support from the diminishing likelihood of a pause in the Federal Reserve's policy tightening cycle, as reinforced by recent hawkish remarks by FOMC officials. At the same time, the looming recession risks are providing some support for the safe-haven JPY, capping further gains for the USD/JPY pair.

From a technical perspective, the USD/JPY pair has failed to find bearish momentum below the 130.00 psychological mark, but further follow-through buying is needed to sustain an extension of the recent recovery. Traders are looking to the Preliminary Michigan Consumer Sentiment Index from the US and a speech by Fed Governor Christopher Waller for possible market moving events.

In terms of the broader U.S. economy, robust labor market data has changed market expectations for FOMC hikes, with the U.S. employers adding nearly double the expected 517,000 jobs in January. This, combined with a multi-decade low unemployment rate, is expected to keep wage pressures and household spending skewed to the upside, reinforcing inflation dynamics. The upcoming inflation report from the U.S. Bureau of Labor Statistics is expected to show a 0.4% rise in both headline and core Consumer Price Index (CPI), reducing the annual rate by two-tenths to 6.3% and 5.5%, respectively.

However, a higher-than-expected CPI could lead traders to reprice the trajectory for the terminal rate higher and further strengthen the higher-for-longer message from the Fed, boosting yields and the U.S. dollar. The DXY index is approaching a key technical resistance near 103.80/104.00 and a decisive breach of this area could trigger a bullish attack on higher levels. On the flip side, initial support appears around the 103.00 handle, with a focus on the 2023 lows below this region.

Regarding the USD/JPY pair, it is currently holding below the last week's high and needs to break and hold above 132.925 to consider a bullish intraday trend. The pair is trending down below the 50 and 200 day exponential moving averages (EMA) and is above the 20 day EMA. The relative strength index (RSI) is trending up and holding flat above the midline, signaling that bulls are in control of the market, but there is no visible divergence yet. A higher RSI value closer to 70 may be seen before a reset.