Yen Soars 2% Amid Tariff Fears—What’s Next After Tokyo CPI? USD/JPY plunged below the 151.00 mark in Early Asian trade today
USD/JPY plunged below the 151.00 mark in Early Asian trade today. The pair saw pressure following the release of strong November inflation figures from Tokyo, Japan’s capital, which backs the case for another BoJ rate hike in December.
Core consumer inflation in Japan’s capital accelerated in November and stayed above the central bank’s 2% target in a sign of broadening price pressure, data showed on Friday, keeping alive market expectations for a near-term interest rate hike.
The yen rose against the dollar after the data, as market players braced for the possibility the Bank of Japan (BOJ) will raise short-term interest rates from the current 0.25% at its next policy meeting in December.
Further, weakness in the dollar index also supported the Yen. The dollar index tumbled below 106 marks on Wednesday, extending its recent retreat as Trump trades appeared to come in for a pruning in forex head of a long U.S. holiday weekend and month end. The pre-Thanksgiving shakeout arrived as many in the market will also be considering the December slow-down that usually hits liquidity.
The Tokyo core consumer price index (CPI), which excludes volatile fresh food costs, rose 2.2% in November from a year earlier, exceeding a median market forecast for a 2.1% gain and accelerating from a 1.8% increase in October.
Another index that strips away both fresh food and fuel costs, which is closely watched by the BOJ as a better gauge of demand-driven inflation, rose 1.9% in November from a year earlier after a 1.8% increase in October.
The data for Tokyo, which is considered a leading indicator of nationwide price trends, showed households hit by rising rent, utility bills and food costs.
Service-sector prices rose 0.9% in November from a year earlier after a 0.8% gain in October, underscoring the BOJ’s view that prospects of sustained wage gains are prodding firms to charge more for services.
The dollar fell 0.3% at 151.125 yen JPY after the data’s release.
Separate data showed Japan’s factory output rose 3.0% in October from the previous month, though manufacturers surveyed by the government expect production to fall in coming months.
The BOJ ended negative interest rates in March and raised its short-term policy rate to 0.25% in July on the view Japan was making steady progress towards durably achieving its 2% inflation target.
Governor Kazuo Ueda has said the BOJ will keep raising rates if inflation remains on track to stably hit 2% as it projects.
Technical Outlook – U.S. Dollar / Japanese Yen
The USDJPY pair retreated from the peak of 153.86, since 15 November and touched a low of 150.12 today. The pair traded down by 0.92%.
On the above chart, formation of a long bearish candlestick is indicating bearishness in the near future. Bearish momentum is expected to persist unless the pair manages to decisively breach the 151.58 resistance level. A move below the 149.35 support zone could accelerate the decline toward the lower support levels 148.55-147.80.
Traders should watch the 149.35 support zone closely for potential price reactions. Any failure to hold above this level might deepen the pair’s downward trajectory. Conversely, a recovery above 151.58 would shift the focus back to higher resistance levels.
Until then, Happy Trading!
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