Japan inflation continues to signal higher

Japan's Manufacturing Purchasing Managers' Index (PMI) for March fell to its lowest level in five months on Monday, owing to inventory expands. The indicator improved to 49.2 in March from 47.7 in February, despite the fact that industrial output and new orders continued to fall for the ninth consecutive month, indicating that it was still impacted by sluggish demand in both domestic and overseas markets.

Meanwhile, the Services Purchasing Managers Index rose to 55.0 in March, up from 54.0 in February, due to the lessening impact of the COVID-19 epidemic and improved consumer confidence, which helped compensate for the industry's continued weakness. As a result, the composite manufacturing and service PMI index expanded at the highest rate since June 2022, with the index revised up to 52.9 in March from 51.1 the previous month, exceeding the 50-point threshold for three months in a row.

As jobs increased and business began to develop again, the employment index increased for the second month in a row and at the fastest rate in ten months.

According to the survey, Japanese companies expect inflation to remain above the 2% target in the coming years. Companies and organizations in Japan estimate inflation to reach 2.8% this year, then fall to 2.3% during the next three years and 2.1% in five years.

Meanwhile, the Bank of Japan (BOJ) reported that in the first quarter of this year, they purchased a record 135.989 trillion yen ($1.02 trillion) in Japanese government bonds (JGBs), nearly double last year's 72.87 trillion yen. This was part of the BOJ's efforts to fend off interest rate attacks from investors in which, buying bonds is a tool used by the BOJ to keep interest rates within the specified low range and to comply with ultra-accommodative monetary policy, whereas selling bonds from investors has the opposite effect.

The US dollar currency pair, on the other hand, fell to a two-month low on Tuesday as a result of dismal economic data. While manufacturing orders continued to fall, the number of job openings fell to the lowest level in nearly two years in February, to 9.9 million from 10.824 million the previous month and below the expected 10.4 million, leading investors to believe that the Federal Reserve may be nearing the end of its interest rate hike. Despite the fact that central banks in other nations continue to boost interest rates in order to combat persistently rising inflation. As a result, while the Yen tends to depreciate more than the US dollar in the medium term due to extremely different rates of return, there may be high volatility in the range based on reported figures and economic indicators in the short term.

Data for Technical Analysis (5H) CFD USD/JPY

Resistance : 131.72, 131.82, 131.99

Support : 131.38, 131.28, 131.11      

5H Outlook

1H Outlook

Source: Investing.com                                           

Buy/Long 1 If the support at the price range 131.33 – 131.38 is touched, but the support at 131.38 cannot be broken, the TP may be set around 131.78 and the SL around 131.30, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 131.72 – 131.77, TP may be set around 131.90 and SL around 131.35, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 131.72 – 131.77 is touched, but the resistance at 131.72 cannot be broken, the TP may be set around 131.34 and the SL around 131.80, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 131.33 – 131.38, TP may be set around 131.18 and SL around 131.75, or up to the risk appetite.       

Pivot Points Apr 05, 2023 02:59AM GMT

Sources: Investing 1, Investing 2