USD/JPY Price Forecast: US Dollar is nearing a key support area at 147.00

• The Yen extends gains for the second consecutive day, favoured by USD weakness.
• Moderate US inflation data boosted hopes of immediate cuts by the Fed, and sent the US Dollar tumbling
• USD/JPY might activate a Bearish Flag formation below 147.00

The US Dollar is trading lower against its main peers on Wednesday, and has extended its reversal against the Japanese Yen after the moderate US inflation figures shown on Tuesday boosted hopes that the Fed will cut interest rates in after the summer.

July's Consumer Prices Index figures showed that yearly inflation remained steady at 2.7%, against expectations of a slight increase to 2.8%. The stronger-than-expected Core CPI, which accelerated to a 3.1% year-on-year rate from 2.9% in June, beyond the market consensus for a 3.0% reading, did not prevent investors from ramping up hopes of a September cut, which are now priced at 95%, according to the CME Fed Watch Tool.

Technical analysis: Potential bearish flag below 147.00

The technical picture shows the pair trading within a corrective channel from the August 5 lows, now at 147.05. A successful break of that level would highlight a bearish flag, which would be confirmed below August 7 and 8 lows, at 146.75.

Further down, the next bearish target is at the July 25 low of 145.85. The Berarish Flag's measured target is the 78.6% Fibonacci retracement of July's bullish cycle, at 144.50.

To the upside, immediate resistance is at the intraday high of 148.10, ahead of Tuesday's peak, at 148,50, and the top of the mentioned bullish channel, now at 148.60.