USD/JPY Subdued as US CPI Inflation Looms

  • USDJPY
    (${instrument.percentChange}%)

USOIL Analysis

Mr Ueda took over as the new Governor of the Bank of Japan over the weekend, not showing any intention to rock the boat and make any immediate changes to the ultra-loose monetary policy setting adopted by his predecessor. In line with previous remarks, the new governor said that "it's appropriate to maintain yield curve control for now", according to Reuters. [1]

The US Fed meanwhile adopted a more conservative stance after the collapse of Silicon Valley Bank, expecting a terminal rate of 5.1%, which suggests just one more 25 basis points rate hike before pausing [2]. Friday's employment report however, was quite strong and unemployment ticked down to 3.5%.

The labor market is still tight and inflation sticky, which may put pressure on the central bank to stay on an aggressive policy path. As, such today's CPI Inflation figures will be closely watched, since they can affect the thinking of policymakers and the trajectory of USD/JPY. Furthermore, the accounts of that last policy decision are released later in the day.

After a strong start to the week, USD/JPY makes another effort to surpass 50% of the March high/low drop. This can open the door to the 76.4% (135.95), but a catalyst will likely be required for such moves and the greenback does not inspire much confidence at this stage for challenging 137.91.

On the other hand, USDJPY is subdued today awaiting the CPI report and had failed at the 50% Fibonacci earlier in the month, while the Relative Strength Index is close to oversold levels. As such, there is risk for a return below the EMA200, which would bring the broader region around 130.00 in the spotlight. However, sustained weakness below it, would be hard to justify based on the current monetary policy environment.

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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.

References

1

Retrieved 12 Apr 2023 https://www.reuters.com/world/asia-pacific/japans-new-central-bank-chief-assumes-office-global-risks-loom-2023-04-10/

2

Retrieved 23 Jul 2024 https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230322.pdf

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