USD/JPY is on downtrend today because of US dollar cool inflation report and Japan wholesale prices increasing. After a cold overnight recession in consumer inflation, US challenged the foresight to tighten US monetary policy. The consumer price index rose 0.5% last month, down from a 0.9% improvement in June, according to economists. Inflation has been reduced in certain areas as central bank policymakers have proven that price pressures are as temporary as used cars.

The Fed has rejected its asset purchase plan and made it a condition of raising interest rates, while temporarily looking at the current inflationary pressures, although there is ongoing debate about how long those pressures will last. Dallas Fed President Robert Kaplan, in an interview with CNBC, said the US Federal Reserve should announce next month the deadline for reducing mass bond purchases and launch them in October. In an interview with Reuters, Richmond Fed President Thomas Parkin said the U.S. job market could take a few more months to recover adequately.

Meanwhile Japanese wholesale prices rose in July at their fastest annual pace in 13 years as per data showed. The corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, rose 5.6 per cent in July from a year earlier, Bank of Japan data showed, beating a median market forecast for a 5.0 per cent gain. It accelerated sharply from a 5.0 per cent increase in June and marked the fastest pace of growth since September 2008, when the index rose 6.9 per cent, the data showed. On a month-on-month basis, wholesale prices rose 1.1 per cent in July after gaining 0.6 per cent, marking the biggest increase since October 2019, the data showed.

Data shows that wholesale prices of many raw materials, including wood, rose 33.1 percent in July from a year earlier, and oil and coal products rose 38.8 percent. Japan’s economy is recovering moderately, as strong export consumption offset some weaknesses. But the resurgent corona virus forced Japan to re-impose emergency controls, raising doubts about the strength of the recovery.

On the other hand Japan’s government will create a new indicator that will show the country’s progress in reducing greenhouse gas emissions compared to gross domestic product (GDP), the Nikkei business daily said on Thursday. The new indicator will explore greenhouse gas emissions released domestically and show whether they are increasing or decreasing compared to the actual GDP growth rate, Nikkei said without saying where its information came from. Japan’s greenhouse gas emissions have been declining in recent years, Nikkei said, adding that the new measure will show the country’s decarbonisation efforts in terms of economic growth.

USD/JPY 4 Hour Chart:

Support: 110.23 (S1), 110.03 (S2), 109.74 (S3).

Resistance: 110.72 (R1), 111.01 (R2), 111.21 (R3).

Amidst all the catalysts favoring yen against greenback. We expect bearish trend for USD/JPY.