USDJPY Continues to Make Higher Lows, After Soft BOJ Core CPI Inflation
USDJPY continues to remain bullish despite the slower pace recently, with the lows during retreats continuing to get higher, supported by MAs on different timeframe charts.
Earlier this month, USD/JPY dropped by 3.5 cents but found support at key levels, as buyers stepped in to reinforce the pair’s upward trend. In recent days, however, increased risk aversion led to another decline, with the pair falling below 154. Despite this pullback, the 20-day SMA on the daily chart has consistently provided support, helping to limit losses and maintain higher lows.
USD/JPY Chart Daily – The 20 SMA Still Holding As Support
Yesterday, USD/JPY dipped to 153.50 twice before seeing strong buying interest, even after opening with a 60-pip bearish gap and ending the day down by 1 cent. If the pair manages to break above 154.80, a return to 156.00 seems plausible. On the other hand, a breach of the 20-day SMA could trigger a deeper decline, potentially toward 152.
Japan’s Economic Challenges Weigh on Outlook
Personal spending and consumption have weakened, signaling challenges in household demand. The GDP Price Index pointed to persistent deflationary pressures, while Q3 GDP growth decelerated. Adding to the concerns, the latest Core Machinery Orders—a key gauge of industrial capital spending—revealed a continued downward trend in September. This decline underscores the difficulties faced by Japan’s industrial sector, a critical driver of its economy, and raises questions about the country’s growth prospects.
Bank of Japan Core CPI Inflation
- November Reading: The Bank of Japan’s Core CPI inflation (year-on-year) came in at 1.5%, falling short of the market expectation of 1.8%.
- This represents a slowdown in inflationary momentum, possibly due to weaker consumer demand or lower energy prices.
- Below Expectations:
- The miss highlights ongoing challenges in sustaining inflation near the BOJ’s 2% target.
- Reflects Japan’s persistent struggle with deflationary pressures despite global inflationary trends.
- Drivers of the Decline:
- Potential factors include easing commodity prices, particularly energy, which have previously supported inflation.
- Weak domestic demand and muted wage growth continue to weigh on price levels.
- Policy Implications:
- The lower-than-expected inflation reading may reinforce the BOJ’s ultra-loose monetary policy stance.
- Any adjustment to its yield curve control (YCC) policy or interest rates appears less likely in the near term.
Japan PM Ishiba on Wage Negotiations
According to Ishiba, the government is asking companies to cooperate in order to secure a “large” salary increase during the spring wage discussions. This initiative aims to build on the progress made last year and end Japan’s deflationary attitude and cycle. Additionally, it will somewhat support the BOJ’s efforts to persuade markets to accept additional rate increases.
USD/JPY Live Chart
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