Global macro overview for 28/07/2017:

The Japanese National CPI data were in line with expectations. The core inflation raised 0.4% as anticipated and the consumer price index (CPI) minus fresh food – a key proxy for core inflation – rose at an annualized 0.4% in June. The Tokyo CPI increased from 0.0% to 0.1% and Tokyo CPI excluding fresh food from 0.1% to 0.2%. With prices rising for the first time since 2015, it looks like the inflation has returned to the Japanese economy.

Earlier this month, the Bank of Japan has left the interest rate unchanged at the level of -0.1%. The interest rate has been kept unchanged since last September when officials shifted their focus from monetary stimulus to yield-curve targeting. In doing so, policymakers downgraded their inflation outlook for the sixth time, as the BOJ's optimistic 2% target remains elusive.The current situation indicates that the Bank of Japan has become rather lonely in its prolonged dovishness. The BoJ's inability to reduce its massive stimulus program or follow other major central banks in shifting to a tighter policy path can be mainly attributed to very soft inflation in Japan. This situation is not likely to end anytime soon, which underlines the growing policy divergence between the BoJ and most other major central banks.

Let's now take a look at the USD/JPY technical picture at the H4 timeframe. After the failed rally attempt towards the level of 112.32, the market reversed and now is back around the 61%Fibo area at the level of 111.06. The momentum indicator stays below fifty level, so further down move is still anticipated.