Home ForexForecasts USD/JPY: Yen under pressure as Japanese core CPI declines

USD/JPY: Yen under pressure as Japanese core CPI declines

by SuperiorInvest
  • Japan’s core CPI falls to 2.3%

The Japanese yen has recovered after losing ground earlier in the day. rose to 148.80, its highest level in three weeks. The yen has recovered and is trading in Europe at 148.10, 0.03% less. It has been a difficult week for the yen, which has fallen 2.1% and is approaching the key 150 level.

Japan’s core CPI falls to 2.3%

Japan’s core inflation slowed for the second consecutive month, reaching 2.3% year-on-year in December. This was in line with the market estimate and was down 2.5% in November. This was the lowest inflation rate since December 2022 and points to weaker inflation pressure. Core inflation has been above the Bank of Japan’s target for 21 consecutive months, but the Bank of Japan appears in no rush to tighten policy, arguing that inflation has been driven by cost-push factors and is not sustainable for above the 2% level.

Still, markets expect the Bank of Japan to tighten policy, which would likely send the Japanese yen soaring. Every Bank of Japan meeting has become a must-watch event in case there is an explosive announcement. The Bank of Japan will meet next Tuesday and is likely to maintain the current policy setup.

Atlanta Federal Reserve President Rafael Bostic has been going around and preaching a message of caution regarding rate policy. Bostic has said that he does not expect a rate hike until the third quarter and said caution was essential to avoid a scenario in which the Fed lowered rates, inflation rose and the Fed had to raise rates again. . Bostic’s comments were the latest example of the Fed rejecting expectations of a rate cut in March. Markets have reduced the odds of a cut in March to 54%, down from 77% just a week ago, according to the CME’s FedWatch tool.

USD/JPY 4-hour chart

USD/JPY Technical

  • USD/JPY broke through the resistance at 148.24 and 148.55 before pulling back.
  • There is support at 147.67 and 147.36.

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