Japan's economy remains stable

Japan's core consumer inflation is expected to pick up again in April, as higher retail prices have outweighed the impact of government energy subsidies. This, combined with the largest wage increase in three decades, prompted the market to anticipate that the Bank of Japan was planning to shift its policies. Although Governor Kazuo Ueda already promised to keep the present easing measures in place after taking office last month.

The Japanese core consumer price index (CPI), which excludes fresh food but includes the price of energy commodities, is expected to rise 3.4% year on year in April. It is predicted to rise from 3.1% in March and February and be the fastest growth since January, when it reached a 41-year high of 4.2%.

While government subsidies for gas and electricity can help manage household energy costs, many corporations began passing the expenses on to consumer goods and service prices at the start of Japan's fiscal year in April, causing the CPI to increase once more.

Wholesale prices in Japan increased 5.8% year on year in April. However, it has slowed for the fourth month in a row. This suggests that the consumer inflationary tendency may be restricted as cost pressures relax.

Meanwhile, the easing of inflationary pressures on international commodity prices is predicted to result in a 0.3% decrease in Japanese imports in April compared to the previous year, the first decrease since January 2021. The Bank of Japan (BOJ) indicated that the yen-denominated import price index declined 2.9% year on year in April after surging 9.6% in March. It suggests that the cost of fuel and raw material imports may have peaked.

Japan's exports are expected to rise 3.0%. Although vehicle exports are recovering due to increased semiconductor supply, Japan's total export growth remains poor in the face of a worldwide economic slump. As a result, the trade balance is expected to be 613.8 billion yen ($4.54 billion) negative.

The US dollar, on the other hand, rose on Friday and is expected to get to its highest weekly level since February. According to a University of Michigan survey released on Friday, May’s consumer confidence in the United States fell to a six-month low due to concerns that higher federal borrowing restrictions could impede the economy. This drove consumer long-term inflation expectations to their highest level since 2011, potentially weighing on the Federal Reserve's monetary policy stance after signaling a temporary halt to interest rate hikes last week.

The yen is expected to be influenced this week by Japan's first-quarter GDP, which will be revealed on Wednesday, and the latest inflation figures, which will be released on Friday. While some analysts anticipate the BOJ will abandon its yield curve-tightening policy in the approaching summer. As a result, the US dollar is expected to outperform the yen throughout this period.

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

Resistance : 135.98, 136.07, 136.21

Support : 135.70, 135.61, 135.47                    

5H Outlook

Source: Investing.com          

Buy/Long 1 If the support at the price range 135.65 – 135.70 is touched, but the support at 135.70 cannot be broken, the TP may be set around 136.03 and the SL around 135.60, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 135.98 – 136.03, TP may be set around 136.21 and SL around 135.65, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 135.98 – 136.03 is touched, but the resistance at 135.98 cannot be broken, the TP may be set around 135.66 and the SL around 136.08, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 135.65 – 135.70, TP may be set around 135.47 and SL around 136.03, or up to the risk appetite.       

Pivot Points May 15, 2023 02:28AM GMT

Sources: Investing 1, Investing 2