USD/JPY Cautious as Japanese Inflation Comes in Hotter than Expected


USD/JPY Analysis

The Fed has adopted a conservative stance around removing monetary restraint. With strong economy, robust labor market and persistence in price pressures recently, policymakers are not in rush to cut rates. The Bank of Japan on the other, is looking to exit its ultra-loose setting, but has pushed back any action and refrained from any changes last month. It stayed the course and wants to make sure it will achieve the 2% inflation target in a "sustainable and stable manner", together with "wage increases".

USD/JPY heads to the conclusion of its second straight profitable month due to this monetary policy differential. This has brought it within striking distance of the July 1990 high (152.20), although larger advance has a higher degree of difficulty.

Today's data showed further deceleration in Japan's inflation (ex-fresh food), but at 2% y/y it was hotter than anticipated. Furthermore, it stayed above the central bank's 2% target for nearly two years, which forecasts it at a median of 2.4% for the next fiscal year (starting in April).

The CPI report seems to support market expectations for policy normalization by the BoJ sooner than later, with April emerging as a likely date, following the outcome of the wage negotiations. As such, USD/JPY faces pressure today, while even if reserved, the Fed has pointed to multiple cuts this year. This creates scope for a correction towards the EMA200 (148.60), but strong catalyst would be needed for daily close below it that would pause the upside bias.

TradingView Pro

As an FXCM account holder you could get TradingView Pro FREE for 1 year saving over $100.

The next leg of the move will be determined by key data from the US, including PCE inflation and GDP updates.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

${} / ${getInstrumentData.ticker} /

Exchange: ${}

${} ${getInstrumentData.divCcy} ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%) ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%)

${getInstrumentData.oneYearLow} 52/wk Range ${getInstrumentData.oneYearHigh}

Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.

Past Performance: Past Performance is not an indicator of future results.

Spreads Widget: When static spreads are displayed, the figures reflect a time-stamped snapshot as of when the market closes. Spreads are variable and are subject to delay. Single Share prices are subject to a 15 minute delay. The spread figures are for informational purposes only. FXCM is not liable for errors, omissions or delays, or for actions relying on this information.