USDJPY Pushing Higher As JPY CPI Cools
Weaker JPY inflation
USDJPY is pushing higher ahead of the weekend as a combination of softer JPY inflation data and a stronger US Dollar combine to lift sentiment. Overnight, the latest National Core CPI reading out of Japan was seen falling back to 1.4% from 1.8% prior, below the 1.7% the market was looking for. With inflationary pressures easing, there is less pressure on the BOJ to hike rates. This is in stark contrast to the US where the latest CPI reading was seen jumping to 3.8% from 3.3% prior, above the 3.7% the market was looking for. On the back of that data, Fed rate hike expectations surged with traders now pricing a more than 50% chance of a hike this year. As a result, there is tradable divergence between the two central banks which should keep USDJPY skewed higher near-term.
US/Iran Talks
Looking ahead, however, we could see USD coming under fresh pressure if the US and Iran agree a peace deal. Iran is reportedly mulling over the latest proposal form the US and while no response has been tendered yet, there is risings peculation that a deal is getting closer. Any positive news over the weekend suggesting that the two sides are becoming more aligned, should see risk assets rallying firmly on Monday with USD likely to fall back accordingly. However, If Iran rejects this latest proposal USD could start the week firmly higher as risk assets recoil.
Technical Views
USDJPY
The rally in USDJPY has seen price breaking back above the 157.85 level with price bouncing off the bull channel lows. While above he and with momentum studies bullish, focus is on a fresh push higher and a test of the 161.95 level next with a continuation of the bull channel the main focus for now.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% and 74% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.