The US dollar has been losing ground over the past 4 sessions against most currencies, and the Japanese yen is no exception.

The dollar has lost around 2.35% over the past week, due mainly to the perception the Fed is getting closer to its pivot point interest rates. Data on the US economy has been somewhat subdued, allowing for speculation the Fed will be able to accommodate lower interest rates.

However, inflation data out tomorrow may bring back the specter of higher for longer. The market is expecting lower core inflation from 3.9% to 3.7%, and a stable overall inflation number of 3.1%, the same as last month.

What we can see from the USD/JPY day chart below is a possible resistance level. The last two candles show a double bottom on 146.84, concurring with a significant support area (black line). It looks to me like it might take a significant drop in the inflation figures for the downward trend in the dollar to continue.

Even numbers as expected, not to mention higher, could give rise to some retracement price action. I would expect any retracement to find resistance around the 148.00 level (blue line). And possibly that rally higher may be short-lived. But a lot depends on what numbers we get from the inflation report tomorrow.

The Japanese economy has shown recent signs of recovery, expanding by 0.1% after shrinking by 0.08%. Further improvement in the Nikkei could also help strengthen the yen, the Japanese index is up 15.5% YTD.