USDJPY has formed higher lows and higher highs since late March, creating an ascending channel on its hourly time frame. Another test of the channel support might be underway.

The Fibonacci retracement tool shows where more buyers are waiting. The 38.2% level lines up with the middle of the channel around 132.75 and already seems to be holding as a floor.

A larger pullback could still dip to the 50% level at 132.33 or the 61.8% Fib close to the 132.00 major psychological support. The channel bottom at 131.50 might be the line in the sand for an uptrend correction.

The 100 SMA is above the 200 SMA to suggest that the path of least resistance is to the upside or that support levels are more likely to hold than to break.

Stochastic is still pointing down, though, so the correction might keep going until the oscillator reaches oversold territory and turns back up. Similarly RSI has some room to head south before reflecting oversold conditions or exhaustion among sellers.

If any of the Fibs are able to keep losses in check, USDJPY could resume the climb to the swing high at the 134.00 major psychological level.

The US dollar turned lower after the release of downbeat CPI readings, as the headline figure showed a decline from 6.0% to 5.0% year-over-year in consumer inflation.

This weighs on Fed tightening forecasts especially since the FOMC minutes already revealed that some policymakers considered pausing in March. Then again, banking sector concerns have since abated, which might keep Fed officials on their hawkish stance in the next meeting.

The upcoming PPI report would provide more clues on inflation trends while Friday’s US retail sales release could also spur volatility for USDJPY. Another round of weak figures might mean more downside for the dollar while upbeat data could allow the rally to resume.