USD/JPY struggling to build on US CPI-led recovery

Despite of its sharp recovery from session low and a subsequent rise to session peak, the USD/JPY pair failed to attract fresh buying interest following the release of US consumer sentiment index for September but has held on to upbeat US CPI-led recovery gains.

US Reuters/Michigan Consumer Sentiment Index for September came in at 89.8, matching August reading but below market expectations of 90.8. Earlier during NA session data released from the US showed consumer price inflation (CPI) rose more-than-expected in August and provided a temporary boost for the greenback across the board, lifting the USD/JPY major to session high level of 102.19. 

The pair, however, failed to build on to its recovery gains and continued with its struggle for a firm direction amid prevalent uncertainty around next policy move by the Bank of Japan. Market participants remain divided over possibilities of further monetary easing by the central bank.

Traders seemed reluctant in building big directional bets ahead of monetary policy meetings of the Federal Reserve and Bank of Japan next week. However, given a three-day long weekend in Japan possibilities of short-covering cannot be negated, which might provide an additional boost to the major.

Technical levels to watch

From current levels, 102.25-30 area seems to act as immediate resistance above which the pair is likely to immediately dart towards 50-day SMA resistance near 102.65-70 region before making a fresh attempt to reclaim 103.00 handle.

On the flip side, renewed weakness back below 102.00 handle, and a subsequent drop below session low support near 101.80-75 region, is likely to turn the pair vulnerable to head back towards weekly low support near 101.55 region en-route September monthly low support near 101.20 level.