Key Points:
- USD/JPY pair influenced by the USD strengthens on the Fed’s hawkish policy, currently at 157.10.
- Japan’s CPI eased from 2.7% to 2.5% in April, still above the BoJ’s 2% target.
In April, Japan’s National Consumer Price Index (CPI) reflected a moderation in inflation, marking a shift from 2.7% in the previous month to 2.5%, as the Statistics Bureau of Japan reported. Although this represents the second consecutive month of easing, the inflation rate remains above the Bank of Japan’s (BoJ) target of 2%. This ongoing moderation suggests a slight cooling in price pressures, yet it continues to exert considerable influence on the BoJ’s monetary policy deliberations.
JPY Declines Due to Softer CPI, Inflation at 2.5%
The Japanese Yen experienced a notable decline on Friday, largely influenced by the softer CPI data and sustained inflation levels. These factors have contributed to the Yen’s depreciation, heightening concerns among investors and financial analysts. Analysts closely watch the currency’s performance because it directly impacts Japan’s export-driven economy and the purchasing power of Japanese consumers.
BoJ Aims for 2% Inflation, Robust Wage Growth.
The BoJ aims for a virtuous cycle with 2% inflation and robust wage growth in its policy stance. This approach aims to create a stable economic environment conducive to long-term growth. The BoJ’s commitment to these goals underscores its broader objective of normalising monetary policy while supporting economic expansion.
BoJ Rate Hike Speculation Grows as JPY Weakens
Investors are increasingly concerned about the persistent weakness of the JPY and its potential impact on the cost of living. This situation has led to speculation that the BoJ might expedite its next interest rate hike. This move aims to counteract the negative effects of a weaker Yen on domestic prices and consumer spending.
Hawkish Fed Policy Boosts USD, Impacting USD/JPY
The US Dollar has strengthened, driven by hawkish sentiment surrounding the Federal Reserve’s policy. The Fed’s decision to maintain higher policy rates for an extended period is reinforced by recent higher-than-expected Purchasing Managers Index (PMI) data from the US. The upcoming Michigan Consumer Sentiment Index will provide further insights into consumer attitudes towards financial and income situations, influencing the USD/JPY currency pair.
USD/JPY at 157.10 with Bullish RSI, Key Levels in Focus
USD/JPY is at 157.10, showing a rising wedge on the daily chart, suggesting a possible bearish reversal. Technical indicators, such as the 14-day Relative Strength Index (RSI), remain above 50, suggesting continued bullish momentum. Key resistance levels are identified at 157.20 and 160.32, while support levels are noted at the nine-day Exponential Moving Average (EMA) of 156.33, with a lower threshold at 156.00 and throwback support at 151.86.
