Yen Strengthens Amid Economic Data Volatility

The yen strengthened following hints from a Bank of Japan policymaker about the potential exit from ultra-easy monetary policies. The yen had approached its weakest point since November but rebounded, with the dollar showing a decline against the Japanese currency. This came amid a 2.07% monthly gain for the dollar against the yen. The yen has been popular for carry trades, where traders sell or borrow yen to invest in higher-yielding currencies.

Consumer inflation in Japan slightly fell below expectations in January, but core inflation remained close to a two-year low. The 2.0% increase in the core consumer prices index (CPI) was slower than December's 2.3%, but it surpassed median market forecasts, supporting expectations for significant pay hikes in March labor-management wage talks. The decline was attributed in part to lower energy costs, reflecting the base effect of the previous year's rise and government subsidies to control gasoline and utility bills.

Bank of Japan Governor Kazuo Ueda cautioned against prematurely concluding sustainable progress toward the 2% inflation target. The unexpected economic downturn in the fourth quarter contributed to a more extended period of ultra-loose policy. Negotiations on pay increases scheduled for March 13 could impact the central bank's decision, with expectations of wage hikes exceeding the previous year's rate.

Japan's unemployment rate remained steady in January at 2.4%, near one-year lows, despite recent data indicating economic cooling. Industrial production and manufacturing sector contraction, along with the fastest decline in factory activity in over three-and-a-half years, underscored weakening demand. However, a private-sector survey revealed manufacturers' confidence in a year-ahead recovery, despite challenges.

Japan's factory output in January fell sharply, particularly in motor vehicles, raising concerns about the economy's fragility. Business-to-business service prices rose 2.1% year-on-year in January, slowing from the previous month. On a positive note, retail sales increased 2.3% in January, marking the 23rd consecutive month of growth.

In the global context, the dollar experienced fluctuations. U.S. inflation data in January, revealing the smallest price gains in nearly three years, initially caused a dip in the dollar. Analysts anticipated a potential economic slowdown and easing inflation, prompting the Federal Reserve to consider rate cuts. Traders are pricing in a 64% probability of the Fed initiating rate cuts in June. As a result, this could lead to the yen maintaining a steady trajectory in the higher range and facing ongoing pressure against the US dollar. Additionally, it might fluctuate within a broader range in response to significant economic data releases from the United States.

Data for Technical Analysis (30Min) CFD USD/JPY

Resistance : 150.41, 150.43, 150.46

Support : 150.33, 150.31, 150.28

30Min Outlook

Source: Investing.com

Buy/Long 1 If the support at the price range 150.23 – 150.33 is touched, but the support at 150.33 cannot be broken, the TP may be set around 150.42 and the SL around 150.18, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 150.41 – 150.51, TP may be set around 150.60 and SL around 150.28, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 150.41 – 150.51 is touched, but the resistance at 150.41 cannot be broken, the TP may be set around 150.33 and the SL around 150.56, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 150.23 – 150.33, TP may be set around 150.15 and SL around 150.46, or up to the risk appetite.       

Pivot Points Mar 1, 2024 02:30AM GMT