USDJPY Breaks 150 After the Jump in Tokyo Inflation CPI
USDJPY has retreated 6 cents off last week’s high and is heading toward 150 fast, with the Tokyo CPI inflation numbers helping put further pressure on this pair.
The USD/JPY has been in a steady bullish trend since mid-September, climbing from below 140 to nearly 157 last week. This rise was supported by the 20 SMA (gray), which acted as a key support level during pullbacks. However, the pace of the upward trend has slowed recently, with signs of a potential bearish reversal as the pair repeatedly tested the 20 SMA. Earlier this month, USD/JPY dropped by 3.5 cents, but buyers stepped in after finding support at the 20 daily SMA.
This week, heightened risk aversion pushed the pair below the 150 mark on Wednesday, breaking the 20 SMA as well. Despite this decline, the 50-day SMA (yellow) and 100 SMA (red) are currently providing support, preventing a deeper drop. If sellers cannot break these levels, the pair may rebound if USD buyers re-enter the market.
Impact of Economic Data and Market Sentiment
- Tokyo CPI Inflation Spike:
- Last night’s inflation data showed a notable increase, raising the possibility of the Bank of Japan (BOJ) considering interest rate hikes. However, such a move remains uncertain given Japan’s struggling economy.
Weak Domestic Indicators in Japan:
- Personal Consumption and Spending: Declining figures highlight subdued household demand.
- Q3 GDP Growth: Slowed growth reflects ongoing economic challenges.
- Core Machinery Orders: Data revealed a sustained drop in September, underscoring weaker business investment.
USD/JPY Chart Daily – The 20 SMA Is Broken, but Other MAs Still Hold
The pair’s immediate direction hinges on the ability of the 50-day and 100-day SMAs to hold as support. A break below these levels could lead to a deeper bearish correction. Conversely, a return of USD strength, driven by safe-haven demand or a hawkish Federal Reserve, could provide the momentum for another leg higher. Meanwhile, uncertainty over the BOJ’s policy stance adds complexity, with inflationary pressures clashing against the backdrop of a sluggish domestic economy.
Tokyo CPI Q3 Inflation Data Summary
- Japan Tokyo headline CPI Q3 2.6% y/y 2.2% expected,
- Tokyo headline CPI Q2 for was 1.8%
- Tokyo CPI excluding fresh food 2.2% for Q3 y/y vs 2.0% expected
- Q2 Tokyo CPI excluding fresh food 1.8%
- Tokyo Q3 CPI excluding fresh food and energy 1.9% y/y 1.9% expected
- Prior CPI excluding fresh food and energy was 1.8%
The Tokyo CPI data for Q3 highlights a clear uptick in inflation across key measures compared to Q2. Headline CPI exceeded expectations, reaching 2.6% year-over-year, indicating accelerating price pressures. Core CPI (excluding fresh food) also surpassed forecasts at 2.2%, while CPI excluding fresh food and energy aligned with projections at 1.9%.
These figures suggest a broadening inflation trend in Tokyo, influenced by rising costs in non-energy and non-fresh food categories. The data reinforces the view that Japan is experiencing a moderate but consistent rise in inflation, a development that could prompt discussions about adjustments in the Bank of Japan’s ultra-loose monetary policy.
USD/JPY Live Chart
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