FxWirePro: USD/JPY attracts selling interest, vulnerable to more downside

• USD/JPY dipped on Friday after data showed Tokyo’s underlying inflation hit a two-year high in May, boosting chances of more BoJ rate hikes.

• Core inflation in Tokyo reached a more than two-year high on Friday, driven by rising food costs, increasing pressure on the central bank to raise interest rates further.

• The Tokyo core consumer price index (CPI), excluding fresh food, rose 3.6% year-on-year in May, surpassing forecasts of 3.5% and up from April’s 3.4% increase.

• A separate index excluding both fresh food and fuel costs, closely monitored by the BOJ as a broader inflation gauge, rose 3.3% year-on-year in May, up from 3.1% in March.

• Data strengthened the case for the BoJ to maintain its hawkish stance as it seeks to anchor inflation expectations and support its price stability target.

• Immediate resistance is located at 145.55 (50%fib), any close above will push the pair towards 146.25(May 29 high).

•  Support is seen at 144.36(38.2%fib) and break below could take the pair towards  141.72 (Lower BB  ).

 Recommendation: Good to sell around 144.00 with stop loss of 145.60  and target price of 143.40