The Japanese yen is experiencing a significant bearish trend, while the US prepares to release its latest Consumer Price Index (CPI) data and Japan is set to release its Q1 GDP data later this week. As a result, the USD/JPY exchange rate has seen a notable increase over the past three days and is currently hovering near its highest point since May 1st.

The upcoming US inflation data, scheduled for release on Wednesday, is expected to reveal stubbornly high inflation rates in April, driven by increases in energy, housing, insurance and medical costs. Economists predict a median estimate of 3.4% for the headline CPI, down from 3.5% previously, and 3.6% for the core CPI, down from 3.8%. If these estimates are accurate, it would indicate that inflation remains higher than the 2% target set by the Federal Reserve, potentially leading to stagflation characterized by high inflation and slow economic growth.

Recent data has shown a slowdown in economic growth, with the economy expanding by only 1.6% in the first quarter, lower than the 3.4% growth in Q4. Consumer confidence has also plummeted to its lowest level since 2022, amid ongoing concerns about inflation. Manufacturing and services PMIs have dropped into the contraction zone in April. Depending on the inflation numbers, the Federal Reserve may decide to maintain higher rates for an extended period or cut rates in the third quarter.

In addition to the US inflation data, the USD/JPY exchange rate will also be influenced by Japan's upcoming GDP numbers, expected to reveal a contraction of 0.4% MoM and 1.5% YoY in Q1. These numbers may put additional pressure on the Bank of Japan as it struggles with a weak yen, and potential rate hikes could further slow down the economy.

The technical analysis of the daily chart indicates a strong bullish trend in the USD/JPY exchange rate, suggesting that Japan's currency interventions are ineffective. The pair has broken above the key support level at 151.88 and the 50-day Exponential Moving Average (EMA), with the Relative Strength Index (RSI) slightly above the neutral level and the Average Directional Index (ADX) pointing upwards, indicating a bullish momentum. The next target is set at 160.25, the highest swing on April 29th.