Japan's inflation rate rises rapidly.

The Japanese yen weakened slightly after a sharp appreciation driven by the Bank of Japan's interest rate hike, with expectations of further rate increases. However, Bank of Japan Governor Kazuo Ueda has not yet set a clear timeline for the next rate adjustment.

The manufacturing PMI in Japan dropped sharply to 48.8 in January from 49.6 in December, marking the seventh consecutive month of contraction and the fastest decline since March 2024. This was due to a significant decrease in output and a continued decline in new orders, which fell at the fastest pace in six months. However, employment showed an upward trend, with unemployment improving for the second consecutive month. While raw material costs eased slightly, overall costs remained high due to rising labor expenses. Business confidence remained positive, as manufacturers believed economic growth could resume if inflation and wage adjustments are properly managed.

Conversely, the services PMI increased to 52.7 in January, indicating growth in the sector for the third consecutive month. New orders continued to rise for the seventh straight month and are expected to accelerate further. International sales also rebounded after slowing in December. Employment in the services sector showed a slight increase, while raw material costs continued to rise, hitting a new high. Despite these challenges, confidence in the services sector remained steady compared to the previous year.

Japan's annual inflation rate rose to 3.6% in December from 2.9% the previous month, the highest since 2023. Food prices surged, reaching a new annual high of 6.4%, with fresh produce and other perishable goods being the main drivers. Electricity costs also rose sharply, hitting an 18.7% increase—the fastest in four months—due to the government ending energy subsidies in May. Housing inflation edged up to 0.8%, while core inflation, excluding volatile food and energy prices, climbed to a 16-month high of 3%.

Japan's trade balance surged to ¥130,940 million in December, up from ¥32,350 million in the same month the previous year, marking a rebound since June. Exports grew faster than imports, with imports increasing by 1.8%, the highest in five months at ¥9,779,670 million, after a 3.8% decline in November. The increase was largely driven by machinery and equipment imports, which rose 21.7%, particularly in computer equipment. Imports of metallic minerals and chemicals also continued to rise, while fuel imports, including petroleum and LNG, contracted by 8.4%. Major trading partners like China and the U.S. accounted for the largest shares of imports. On the export side, Japan saw a 2.8% increase, hitting a record high of ¥9,910,600 million, with machinery exports expanding by 3.7%, led by semiconductors at 10.6%, and other machinery exports growing by 14.7%.

Techical analysis data (5H)

Resistance: 154.74, 155.11, 155.62

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 153.35 - 153.86 but cannot break the support at 153.86, you may set a TP at approximately 155.11 and SL at around 152.98 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 154.74 - 155.11, you may set a TP at approximately 155.62 and SL at around 153.35 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 154.74 - 155.11 but cannot break the resistance at 154.74, you may set a TP at approximately 153.35 and SL at around 155.62 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 153.35 - 153.86, you may set a TP at approximately 152.98 and SL at around 155.11 or according to your acceptable risk.

Pivot point January 27, 2025 10:18 PM. GMT+7