Japan's inflation rate has returned to the BoJ's target range.

The Japanese yen continues to strengthen after a previous period of depreciation, supported by Shigeru Ishiba, the former defense minister, being chosen as the leader of Japan’s ruling party, making him the next prime minister. Ishiba is likely to endorse economic stimulus and expansionary fiscal policies, such as increasing money supply into the economy or lowering interest rates, which would boost GDP growth.

Tokyo's core consumer price index (CPI) increased by 2% year-on-year in September, marking a sharp deceleration from 2.4% growth in August. The latest figure is still in line with the Bank of Japan's 2% target. The BoJ's recent meeting minutes reveal that some policymakers remain cautious about inflation risks and have warned against raising market expectations too much regarding future interest rate hikes.

Kazuo Ueda, the Governor of the Bank of Japan, added that labor market trends, including wage adjustments by companies, are likely to continue in the coming years. Macroeconomic factors, such as labor shortages and rising corporate profits, are also supporting wage increases, as Japan remains in a prolonged low-interest-rate environment.

Japan's manufacturing PMI fell to 49.6, indicating a contraction in manufacturing activity. Output slightly contracted, and new orders continued to decline, leading companies to increase stock levels for the first time in three months. Meanwhile, inflation in raw material costs declined, resulting in lower production costs.

On the other hand, Japan's services PMI rose to 53.9, marking the third consecutive month of expansion in the services sector, driven by strong external demand as new orders continued to increase. At the same time, rising production costs have led companies to find ways to pass on higher costs to customers.

The yield on Japan's 10-year government bonds rose to 0.85%, in line with market expectations. The Bank of Japan may adopt tighter monetary policies to limit inflation risks. Meanwhile, economic data suggest that the BoJ may have the opportunity to raise interest rates further.

Techical analysis data (5H)

Resistance: 143.36, 144.2, 144.63

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 141.66 - 142.09 but cannot break the support at 142.09, you may set a TP at approximately 144.2 and SL at around 140.82 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 143.36 - 144.2, you may set a TP at approximately 144.63 and SL at around 141.66 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 143.36 - 144.2 but cannot break the resistance at 143.36, you may set a TP at approximately 141.66 and SL at around 144.63 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 141.66 - 142.09, you may set a TP at approximately 140.82 and SL at around 144.2 or according to your acceptable risk.

Pivot point September 28, 2024 00:58 AM. GMT+7