Author: Mr. Amar – Technical Analysts

Core consumer prices in Japan’s capital rose at the fastest annual pace in more than two years in March, fuelled by rising energy costs. The inexorable upward trend in world commodity prices following the war in Ukraine could derail Japan’s fragile import-reliant recovery from the pandemic, even as domestic COVID19 infections ease and distancing restrictions ease. The yen headed for its worst week in two years on Friday, hit by Japan’s rising import costs and low-interest rates, while commodity currencies posted a second straight weekly gain against the dollar as export prices remain elevated.

Tokyo’s central consumer price index (CPI), which excludes volatile fresh groceries but includes energy items, rose 0.8% year on year in March, the fastest pace since December 2019 and higher than the average market forecast for a 0.7% rise and 0.5% increase in February. The latest phase of the decline was sparked by aggressive comments from Federal Reserve Chair Jerome Powell this week and a subsequent rise in US yields. The Bank of Japan (BOJ) has also maintained an accommodative tone, although some traders are beginning to believe the yen is falling to uncomfortable lows from a six-year low.

Perhaps most impressive is how this move looks on the USD/JPY longer-term chart. From the monthly chart and below we can see the price action finally dissipating above many resistances that have been in play for a while. And the momentum shown on this monthly bar goes back as far as 2012 or 2014. The yen is collapsing and is down 2.6% against the dollar this week. It has broken the psychological barrier of $120 per dollar and faces a major resistance test of around 123.70 at 122.44.