In other news, the USD/JPY reached a new weekly high on Wednesday. The policy gap between the Fed and the BoJ has not narrowed, and that’s good news. Investors are sitting on the sidelines until the US CPI is released.

Wednesday’s first half of trading saw the US dollar strengthen against the Japanese yen for a second consecutive day, reaching a new weekly high. In the early European session, spot prices are still below the mid-147.00s as traders wait for US consumer inflation data before making directional bets.

The US CPI report, due later in the early North American session, will impact the Fed’s policy outlook. This will increase the demand for USD and help investors anticipate the future direction of the USD/JPY exchange rate. An increasing number of market participants are betting that the Fed will keep interest rates high for longer, which is good news for the USD and the major.

Optimistic investors view last week’s good macro data as evidence of a thriving economy and expect the US central bank to retain its hawkish stance. Inflation fears and the need for Fed policy tightening have stoked the recent rise in Crude Oil prices. Forecasts for the dollar and US Treasury bond yields remain optimistic.

The Japanese yen (JPY) was weighed down by weaker domestic data showing that annual wholesale inflation, as measured by the Corporate Goods Price Index (CGPI), fell for the eighth consecutive month in August. Since December’s 10.6% YoY growth rate, the index has dropped to 3.2%. According to data, the Bank of Japan (BoJ) will likely keep rates steady through next summer.

Trade Idea:

Entering a long position on the USD/JPY pair on a break above 147.50. This key resistance level has been holding the pair back in recent weeks. A break above this level would signal that the bulls are in control and could lead to further gains. The stop loss should be placed below 146.50, the recent support level.