Japan still face inflation pressure

The Japanese yen has stabilized again at around 156 yen per US dollar after continuously weakening since the beginning of the year. Toyoaki Nakamura, a member of the Bank of Japan, warned that the inflation rate is expected to fall below the 2% target next year if consumer spending remains sluggish, impacting the prospects of raising interest rates further.

Meanwhile, Ryozo Himino, Deputy Governor of the Bank of Japan, stated earlier this week that the central bank must be particularly cautious about changing its monetary policy, as such changes could affect the already weakening yen. However, global economic uncertainties and conflicts in various countries might drive investors towards safer currencies.

Several industries in Japan have increased their investments in buildings and equipment by 6.8% year-on-year in the first quarter of 2024, marking the 12th consecutive quarterly increase but slowing down from a 16.4% rise in the previous quarter. Most of the capital increase has been in machinery investments for food production and metal products.

Japan's manufacturing PMI fell to 50.4 in May, indicating the first expansion in a year due to growth in inventories, order volumes, and production. This was despite weak demand from China, Europe, and Vietnam. Employment continued to rise due to high labor demand.

The service sector PMI rose to 53.8 in May, reflecting the most significant slowdown. New orders grew at a decelerating rate due to stable domestic demand, while foreign sales increased the most in several years, along with rising employment.

The yield on Japan's 10-year government bonds fell below 1%, following the decline in US government bond yields, indicating expected economic slowdown signals. Additionally, the easing labor market in the US has raised hopes for a Federal Reserve rate cut. In Japan, real wages have declined for the 25th consecutive month as inflation outpaces wage growth, potentially pressuring the Bank of Japan to raise interest rates sooner than expected.

Techical analysis data (5H)

Resistance: 156.33, 156.69, 156.99

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 155.35 - 155.66 but cannot break the support at 155.66, you may set a TP at approximately 156.69 and SL at around 154.99 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 156.33 - 156.69, you may set a TP at approximately 156.99 and SL at around 155.35 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 156.33 - 156.69 but cannot break the resistance at 156.33, you may set a TP at approximately 155.35 and SL at around 156.99 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 155.35 - 155.66, you may set a TP at approximately 154.99 and SL at around 156.69 or according to your acceptable risk.

Pivot point June 6, 2024 09:04 PM. GMT+7