Japanese Yen Nears Two-Month Low, What’s Next in the Tale?

The Japanese yen remains near a two-month low against the US dollar after the currency reacted neutrally to the release of domestic consumer inflation figures yesterday. The yen has extended its upward trend over the past three weeks.

USDJPY traded at 148.27, up 0.09% today.

The Japanese yen had little reaction to domestic consumer inflation numbers, which slowed as expected in December. Japan’s key consumer price index (CPI) bolstered market expectations that the Bank of Japan (BoJ) will maintain a more dovish stance at its monetary policy meeting next week, amid sluggish wage growth data last week.

The National Bureau of Statistics reported that the consumer price index (CPI) fell to 2.6 percent from 2.8 percent in December, the lowest reading since June 2022. Japan’s core inflation, which excludes variable prices of fresh food. , slowed further to 2.3% from 2.5% in November, the lowest level since July 2022.

This beats the New Year and Japan’s data on earthquake and weak wage growth, ensuring that the Bank of Japan does not deviate of his extreme attitude.

In addition, markets are betting on early Federal Reserve rate hikes after Thursday’s data showed jobless claims fell to the lowest level since September 2022.

Meanwhile, the US dollar is holding strong near a more than one-month high and continues to rise for a second week in a row, as the Federal Reserve (Fed) bets on an early interest rate hike. Data released on Thursday showed that US jobless claims fell to their lowest level in nearly a year and a half, pointing to strength in the labor market. This follows stronger US retail sales on Wednesday, which showed the economy is in good shape and gives the Fed room to keep interest rates higher for longer. This will further raise the US Treasury yield and act as a headwind for the dollar, strengthening the positive outlook for the USD/JPY pair.

Technical Outlook

The USDJPY pair continued to rise at the beginning of the year. The pair rebounded from a low of 140.2490 and made a high of 148.5260 yesterday, posted an increase of almost 5%.

In the chart above, the rally that started on January 16, 2023 was seen as an impulse wave 1-5 that ended at the November 2023 high of 151,908. Now the pair has turned to in a corrective wave ABC. Currently, the pair is trading in the A-B leg, which can reach the 149.80-150.50 level.

Furthermore, the formation of three white candlesticks also offers a bullish view. RSI 14 and its 9 SMA gives a positive crossover.

All the technical factors mentioned above point to an uptrend. Therefore, the short-term trend is still positive with USDJPY rising 149.80-150.50. On the downside, there is major support at 146.00, below which the pair could pull back to 143.20-140.00 again

Commodity Samachar
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