Japan’s core consumer prices in December rose 4.0% from a year earlier, double the central bank’s 2% target, while hitting a fresh 41-year high.
The Dollar/Yen is edging higher despite speculation that the Bank of Japan (BOJ) will eventually move away from its ultra-easy policy. The Forex pair is also being underpinned by firm U.S. Treasury yields.
At 06:17 GMT, the USD/JPY is trading 129.088, up 0.662 or +0.52%. On Thursday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) is at $72.65, up $0.23 or +0.32%.
The USD/JPY strengthened earlier this week after the BOJ’s decision to stand pat on its ultra-loose monetary policy. However, it also weakened as traders still bet on a shift in the Bank of Japan’s policy.
However, analysts are divided on whether the BOJ could raise rates this year, due to uncertainty over whether wages will increase enough to offset the hit to consumption from rising living costs and keep inflation sustainably around 2%.
Japan’s core consumer prices in December rose 4.0% from a year earlier, double the central bank’s 2% target, hitting a fresh 41-year high and keeping alive market expectations the central bank could phase out ultra-low interest rates.
The main trend is down according to the daily swing chart. However, momentum is trending higher. A trade through 127.227 will signal a resumption of the downtrend. A move through 134.775 will change the main trend to up.
The minor trend is up. It turned higher on Wednesday. The move shifted momentum to the upside.
The nearest support is the May 24, 2022 main bottom at 126.362. The closest resistance is a pair of 50% levels at 103.050 and 131.001.
Trader reaction to a minor pivot at 129.403 is likely to determine the direction of the USD/JPY on Friday.
A sustained move over 129.403 will indicate the presence of buyers. This could trigger a surge into a pair of pivots at 130.050 and 131.001. Overtaking this level could lead to a test of the minor tops at 131.578 and 131.872.
A sustained move under 129.402 will signal the presence of sellers. This could lead to a retest of the main bottom at 127.227, followed by the long-term support at 126.362.
James Hyerczyk is a U.S. based seasoned technical analyst and educator with over 40 years of experience in market analysis and trading, specializing in chart patterns and price movement. He is the author of two books on technical analysis and has a background in both futures and stock markets.