What the decline in USD/JPY is telling us with Japan's CPI report due Friday

I fear that we're near some broadly-accepted paradigm shifts in markets:

1) Acceptance that central banks will hike us into a recession

2) Understanding that inflation Inflation Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Read this Term is global, including in Japan

3) Deeper fears about global growth

USD/JPY went on a one-way nine-week run to 130.00 from 115.00 and the case is improving for a retracement because of those themes above.

Today the SNB acknowledged inflationary pressures and the Swiss franc has a strong bid. If/when the Bank of Japan is forced to do the same, we could see a sharper unwind.

A big hurdle is the Japanese CPI report, which is coming up on Friday (Japan time). The consensus is for price rises of just 1.5% y/y but if we see a surprise, it could be followed shortly afterwards by a BOJ pivot. The moment that turn comes, the yen could recapture a bid, particularly if the risk-off mood holds.

On the USD/JPY chart, a messy head-and-shoulders top is forming that would target 123.00 on the break of the neckline.

All told, I would prefer selling AUD/JPY or GBP/JPY on global growth fears but the USD/JPY chart is worth watching closely.