Japanese Yen news and analysis
- Japan’s inflation rate rises month-on-month at the fastest pace in 10 years
- Extreme yen short positions may be tested in thin trading affected by holiday
- USD/JPY remains flat for two days ahead of Thanksgiving weekend
- In this article’s analysis, chart pattern and the key support and resistance level. For more information, please see our comprehensive information. educational library
Japan’s inflation accelerates at fastest pace in 10 years
Japan’s inflation rate (composite CPI) rose to 3.3% from 3.0% in September, but the world’s core inflation rate (inflation minus variable items such as food and energy) fell to 4% from 4.2%. did. But what stood out in the data were the month-on-month numbers, which revealed a marked acceleration in inflation towards the end of the year. Bank of Japan Governor Kazuo Ueda has previously said the board will have enough data by the end of the year to make a decision on possible policy normalization, or lifting negative interest rates.
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The graph below shows the month-on-month change in Japan’s inflation data, and reveals a tendency to hit new highs despite volatile spikes being low. The central bank is closely monitoring inflation and wage growth data as these are key determinants of whether demand-driven pressures are likely to remain at sustained high levels.
Japan’s inflation rate (month-on-month)
Source: Refinitiv, Author richard snow
As you can see from the Japanese Yen Index below, the Japanese Yen has given up most of last week’s gains. The index is an equally weighted index of four major currencies against the yen.
Japanese Yen Index (USD/JPY. pound/yen, euro/yen, Australian dollar/yen)
Source: TradingView, Author richard snow
USD/JPY barely makes a difference, testing dynamic resistance
Yesterday’s USD/JPY was flat, and it seems to be moving smoothly with almost no change in opening and closing prices for two consecutive days. The pair has been up this week and is on track for a weekly rally, which appears to be capped around 150 once again.
The 50-day simple moving average, which previously acted as dynamic support, has now switched to dynamic resistance, containing the currency pair. Further declines could occur if next week’s U.S. growth and inflation data are disappointing. Yesterday, the EU’s GDP was revised downwards, and while the US is hoping to avoid following the same path as Europe, there are some red flags.
USD/JPY daily chart
Source: TradingView, Author richard snow
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Positioning remains significantly short yen, long dollar/yen is overcrowded
The latest CoT data shows that smart money positioning remains significantly short compared to the previous three years of measurements, and the gap looks set to widen further. The risk here is that despite the lack of urgency regarding possible currency intervention by Tokyo, upside room for USD/JPY appears limited as the 150 market is closely monitored. It is. A sharp decline could also force long positions in USD/JPY to be liquidated, exacerbating the potential move. The dollar remains under pressure, with weak fundamental indicators now putting the US in line with other less resilient major economies, suggesting there may still be further easing by the US dollar. ing.
Source: Refinitiv, Author richard snow
USD/JPY may struggle to gain direction early next week until US GDP and PCE data are released on Wednesday and Thursday respectively.
— Written by Richard Snow for DailyFX.com
Contact and follow Richard on Twitter: @RichardSnow