USD/JPY bears take over and move in a critical support level

• USD/JPY bears are in control in the Asian session and eye a downside extension. 
• The bulls need to commit at this juncture at key support. 

USD/JPY is lower on the day as the US dollar comes under pressure ahead of the US inflation data that will be released later today in the New York session. At the time of writing, the pair is losing around 0.13% and has dropped from a high of 142.84 and has reached a low of 142.41 so far. 

US bond yields were losing ground on Monday, taking a lead from Europe, but finished the session higher as markets look to today's Consumer Price Index print. The 2-year government bond yields climbed from 3.51% to 3.56%, and the 10-year government bond yields moved from 3.33% to 3.36%. In Tokyo, they are sliding which has given the yen a boost.

For today's data, analysts at Westpac argued that it ''will highlight the downward pressure on headline inflation being driven by declining oil prices (market f/c: -0.1%mth, 8.1% year, down from 8.5% year in July). Focus will therefore be centred on the core measure to better gauge the current pace of inflation and the likely response from the Federal Open Market Committee (market f/c: +0.3%mth, 6.1% year vs 5.9% year in July).'' 

Meanwhile, JPY net short positions rose back to their July levels reflecting the continued dovish policy position of the Bank of Japan, analysts at Rabobank said. ''This has triggered some verbal intervention from Japanese government officials in recent days, though actual intervention would be politically awkward both in terms of G7 disapproval and given that it would be leaning against the BoJ’s policy position.''

USD/JPY technical analysis

As per the prior analysis, USD/JPY Price Analysis: Bears in control ahead of Tokyo, eye 142.50 then 141.50, the hourly chart showed that the price was correcting from the prior bullish rally and was filling the wick left behind by the prior bearish hourly bar.

A continuation lower in the Tokyo session was forecasted to complete a move to the neckline of the W-formation:

 This is the first defence on the way into the daily 38.2% Fibonacci targets near 141.50: