USDJPY Bounces Off the 100 Daily SMA, Japan Inflation Grows

USDJPY crashed 4.5 cents lower, as the USD tumbled and safe havens surged, but it made a decent bounce of 2 cents yesterday, off the 100 daily SMA. The National Core CPI from Japan was also released early in the Asian session, with expectations for a 2 points jump in inflation from 2.5% to 2.7%.

USD/JPY surged past the critical 160.00 level, approaching 162 earlier this month, with Japanese officials and the BOJ remaining on the sidelines. This bolstered market confidence in achieving new highs. However, after the release of a weaker-than-expected US CPI inflation report for June, the pair quickly reversed last week, with the price dipping below 160. Although buyers seemed to lack confidence, the 50-day SMA (yellow) provided support earlier this week.

USD/JPY Chart Daily – The 100 SMA Has Taken Over As Support

On Wednesday, the price broke below this moving average, which had served as support since early March, pushing the lows higher. Despite this, the green 100-day SMA held as support, and yesterday saw a 200-pip rebound as the USD began to recover alongside safe havens. Early this morning, Japan’s inflation report was released, with consensus indicating that Japan’s core national CPI, excluding food, is expected to rise from 2.5% to 2.9% year-over-year in June, up from 2.8% in May.

The positive US retail sales and robust Philadelphia Federal Reserve manufacturing reports received this week suggest that reports of declining consumer spending may have been exaggerated. Overall, this supports the soft-landing narrative and enhances risk sentiment. In this context, the JPY is likely to continue weakening against other major currencies. Unless there is a significant change in fundamentals, Japanese authorities will have limited capacity to halt this trend. As long as global growth remains stable and risk sentiment is generally positive, the JPY should stay on a downtrend.

Japanese National CPI Inflation Report for June

• June CPI Headline: 2.8% y/y vs. 2.9% expected
  • May CPI Headline was 2.8% y/y.
  • This indicates a steady inflation rate, aligning with the previous month’s figures but slightly below market expectations.
• June National Core CPI (excluding Fresh Food): 2.6% y/y vs. 2.6% expected
  • May National Core CPI (excluding Fresh Food) was 2.5% y/y.
  • The increase shows a slight uptick in core inflation, suggesting underlying price pressures are stable.
• June National Core CPI (excluding Food and Energy): 2.2% y/y vs. 2.1% previously
  • This measure, which excludes more volatile food and energy prices, has risen from the previous month’s rate.
  • It shows that even when excluding these volatile items, inflationary pressures remain sticky.

USD/JPY Live Chart