The USDJPY pair is stuck in a tight range as traders await the US Consumer Price Index (CPI) report. The US dollar has weakened since the last Non-Farm Payrolls (NFP) report, which was below expectations. This has led many to rethink their views on future actions by the Federal Reserve. Currently, the market expects about 58 basis points of rate cuts by the end of the year, up from 35 basis points before the NFP announcement. The upcoming US CPI report is crucial since recent hints from the Fed suggest a possible rate cut in September. To change this outlook, we would need to see significantly high inflation data paired with strong future NFP results. The Japanese yen (JPY) has strengthened significantly due to the weak NFP data and revised Fed outlook. If US data remains weak or if Japan’s inflation rises, we could see even more strength in the JPY.

Market Consolidation and Key Levels

On the daily chart for USDJPY, the pair is consolidating after the sell-off following the NFP report, looking for guidance from the US CPI report. Sellers are targeting the major trendline near 144.50. The 4-hour chart shows similar consolidation, with recent resistance found at 148.00. Both buyers and sellers are waiting for a breakout. Key upcoming reports include the US CPI, PPI, Jobless Claims, Retail Sales, and Consumer Sentiment, along with more comments from the Fed. The USD/JPY pair is currently trading within a narrow range as we approach the important US CPI report set for tomorrow, August 12, 2025. This situation has caused traders to hold back on making large new positions until they see the inflation data. The dollar has weakened since the July Non-Farm Payrolls report showed only 155,000 job gains, which fell short of expectations. This softer data has pushed the market to price in over 50 basis points of Fed rate cuts by year-end. If tomorrow’s inflation number is surprisingly low, it could reinforce expectations for a rate cut in September. This scenario recalls late 2023, when weak US economic data caused the dollar to decline after a long period of strength. We are monitoring to see if this is another turning point for the currency. Historically, once the Fed changes its stance, the trend can shift quickly.

Opportunities for Traders

The yen has gained from the changes in the Fed’s outlook. Japan’s core inflation rate, which was 2.7% last month, remains above the Bank of Japan’s target, which leaves room for more policy tightening. For the yen to strengthen further, we would likely need continued weak data from the US. For those trading derivatives, buying options ahead of the CPI release could be a smart move. Given the tight trading range, implied volatility has likely dropped, making strategies like straddles or strangles cheaper to implement. This approach allows traders to profit from a significant price movement in either direction without predicting the data’s outcome. We are closely watching the 148.00 level as a key resistance point. Traders with a bearish outlook might want to consider selling futures or buying put options if prices do not break above this level after the data is released. On the other hand, a strong move above 148.00 could indicate a move toward the 151.00 area. The major trendline around 144.50 remains the main target for sellers. If the CPI data comes in much weaker than expected, we could quickly test this level. This area might also be a good opportunity to buy call options with limited risk, anticipating a bounce from long-term support. Create your live VT Markets account and start trading now.

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