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Yen Rallying on Inflation Jump
The rally in the Japanese Yen is gathering pace ahead of the weekend with USDJPY continuing to reverse lower. Overnight, the latest Tokyo CPI data showed inflation jumping to 2.2% last month, up from 1.8% prior and above the 2% the market was looking for. The data comes amidst an uptick in hawkish BOJ expectations on the back of recent comments from BOJ governor Ueda. The BOJ chief signalled that further tightening would likely be appropriate if price continue to rise as expected. With the latest inflation reflecting a continued rise, traders are now pricing in a higher likelihood of a further hike in December.
Bearish USD Factors
A weaker US Dollar is also feeding into the move lower in USDJPY this week. A pullback in US treasuries on the back of news of Trump’s selection of hedge fund manager Scott Bressent for treasury secretary, as well as month end flows, are weighing on the greenback this week. An uptick in Fed easing expectations is also driving USD lower here with pricing for a December rate cut having rise to around the 70% level from below 50% a few weeks ago. Given the divergence between Fed and BOJ policy expectations, USDJPY looks likely to remain pressured for now.
Technical Views
USDJPY
The sell off in USDJPY has seen price breaking down below the 152 level. With momentum studies weakening, focus is on a further push lower and a test of the 146.81 level and bull trend line next. If broken, the YTD lows round 140.59 come back into view.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.