Author: Mr. Amar – Technical Analyst

Inflation in Japan is moving higher, although at a much more modest pin than is the case in the US or UK. Core CPI, which had been hovering close to zero for months, surprised to the upside in November with a 0.5%, up from 0.1% prior. This was its highest level since February 2020. BoJ policymakers are not losing sleep over surging inflation, but after decades of deflation, rising prices are a novelty for the central bank, as well for businesses and consumers. The BoJ has no plans to shift from its ultra-easy stance, and the bank kept policy intact at this week’s policy meeting.

Fears of the US Federal Reserve’s hawkish appearance in the next week’s monetary policy meeting seem to weigh on the USD/JPY prices the most. On the same line are the recently downbeat signals from the Bank of Japan monetary policy meeting minutes as well as mixed inflation data from Japan. On the daily chart of this pair, analysts predict that price will continue fall until 113.000 before US Fed make any rate hikes. This is because of the strong support is detected here and if the area fails, 112. 100 will be focus next.

That said, the USD/JPY prices cheered mixed data as an excuse to curtain bullish bets on the greenback and the Treasury yields. The US Jobless Claims jumped to the highest since late October and the Philadelphia Fed Manufacturing Survey details also improved for January. Looking forward, a lack of major data/events can restrict short-term USD/JPY moves but the bearish bias remains intact amid downbeat Treasury yields and pre-Fed fears.