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Japan's corporate service inflation rises, yen steadyThe Japanese yen is showing little movement on Christmas Day. Japanese markets are open but with most global markets closed for the holiday, the currency markets will be very quiet today. In the European session, USD/JPY is trading at 157.29, up 0.08% on the day. Japanese inflation indicators have been heading higher and the upswing was repeated on Wednesday as Japan's corporate service price index (CSPI) climbed 3.0% in November. This marked a second straight month that CSPI has accelerated, after a 2.9% gain in October. CSPI measures the price that companies charge each other for services and is a leading indicator of service-sector inflation, which is closely watched by the Bank of Japan. The rise in CSPI supports the case that wages are rising and businesses are passing higher costs to consumers. This increase in demand-driven inflation is exactly what the BoJ wants to see before raising interest rates. The BoJ has hinted that further rate hikes are coming but hasn't provided any hints about the timing. There were some expectations of a rate hike at last week's meeting but the central bank stayed on the sidelines and Governor Ueda sounded dovish, saying that inflation was increasing "at a moderate rate" and the BoJ could take its time raising rates. Is Ueda throwing up a smoke screen to keep speculators away when the BoJ is in fact planning a rate hike in the next month or two? Perhaps. Inflation has been trending higher and the yen is falling fast, plunging 9.5% since Oct. 1. The yen pushed past the symbolic 160 level in July and could do so again. If the BoJ is genuinely concerned with the rapid descent of the yen, it will have to consider a rate hike or take more extreme action and intervene in the currency markets to prop up the ailing yen. There is resistance at 157.41 and 157.66 USD/JPY tested support at 157.15 and 156.90 earlier. Below, there is support at 156.64
by OANDA
BOJ’s Ueda hints at rate hike, yen dipsThe Japanese yen is lower on Monday. In the European session, USD/JPY is trading at 150.03, up 0.26% on the day. Bank of Japan Governor Ueda has been hinting about a rate hike and gave what was perhaps his strongest hint on Friday. In a newspaper interview, Ueda said that interest rate hikes are “nearing in the sense that economic data are on track”. Ueda also added that the BoJ has a “big question mark” over the outlook for US economic policy, with Donald Trump taking office next month. Ueda reiterated that the central bank wants to see a sustainable rise by inflation to the 2% target and expressed concern about the weak yen, warning the BoJ could respond with “countermeasures”. The BoJ makes its next rate announcement on Dec.19. Will it raise rates at that meeting or wait until January? The BoJ has done a poor job of communicating its intentions and after the surprise BoJ rate hike in August triggered turmoil in the financial markets. Ueda’s comments may have been an attempt to show greater transparency, although he failed to mention a timeline for the next rate hike. The markets have fully priced in a rate hike by January, with the probability of a December hike at around 60%. In the US, it’s a busy data calendar, highlighted by nonfarm payrolls on Friday. The ISM Manufacturing PMI will be released later today, with a market estimate of 47.5 for November, compared to 46.5 in October. Manufacturing has been in a prolonged recession, with only one month of growth over the past two years. USD/JPY tested resistance at 150.30 earlier. Above, there is resistance at 151.13 There is support at 148.89 and 148.06
by OANDA
Japanese yen declines on BoJ’s Ueda cautious remarksThe Japanese yen is lower on Monday. In the European session, USD/JPY is trading at 155.08, up 0.51% on the day. Bank of Japan Governor Ueda sent mixed signals about a rate hike in December, leaving investors unclear and sending the yen lower against the US dollar. Ueda said that the timing of a rate hike depended on economic conditions. He noted that there was progress towards sustained inflation from higher wages and consumption, but warned that there were “numerous uncertainties” that the Bank would have to monitor, such as the impact of President-elect Trump’s economic policies. Ueda said that the central bank wouldn’t wait for all uncertainties to clear up before a hike and that the timing would depend on the “economic, price and financial outlook”. The lack of clarity from Ueda wasn’t all that surprising as the BoJ is not transparent with its rate plans, which results in strong volatility whenever the BoJ makes a rate move. Ueda’s comments didn’t change market expectations, as the pricing of a rate hike in December is around 55%. A strong rise in inflation or a significant decline in the yen would support a rate hike at the December meeting. The week ended on a positive note as US retail sales were better than expected in October. Retail sales rose 0.4% m/m, better than the market estimate of 0.3% and the September reading was revised from 0.4% to 0.8%. Annually, retail sales posted a strong gain of 2.8%, up from an upwardly revised gain of 1% in September and blowing past the forecast of 1.9%. The strong data for September and October has lowered the odds of a rate cut in December, which are currently around 60%. On Thursday, prior to the retail sales report, Fed Chair Powell said that “the economy is not sending any signals that we need to be in a hurry to lower rates”. USD/JPY is testing resistance at 156.07. The next resistance line is 157.86 154.97 and 153.18 are the next support levels
by OANDA
USD/JPY soars as rate hike hopes chilledThe yen has stabilized after massive losses last week. In the North American session, the USD/JPY is trading at 148.03 at the time of writing, up 0.45%. The yen is coming off a spectacularly bad week with a 4.5% decline. This marked the yen’s worst week since 2020, during the covid pandemic. The sharp decline was driven by the political drama in Japan, which included the election of Shigeru Ishiba as the new prime minister. Ishiba has supported the Bank of Japan tightening policy in the past, but he has taken a U-turn on monetary policy since being elected prime minister. Ishiba may have shifted his stance in order to avoid any divisive issues, such as raising interest rates, ahead of the snap election on October 27. The election will be followed by the next BoJ meeting on October 31, with the BoJ expected to maintain its policy settings. On Wednesday, Ishiba met with BoJ Governor Ueda and said that Japan did not need to raise rates further. In a speech to parliament on Friday, Ishiba pledged to defeat deflation, a message which signaled a continuation of “Abenomics”, which advocates an accommodative policy. The yen slid 1.1% on Friday as expectations for a rate hike have evaporated. Ishiba’s dovish stance and comments by BoJ officials that it the Bank will be extremely cautious before raising rates has dashed expectations for a near-term rate hike and made the Japanese currency less attractive to investors. The US labor market surprised to the upside, as September nonfarm payrolls surged by 254 thousand, up from a revised 159 thousand in August and blowing past the market estimate of 140 thousand. This was the strongest job report in six months. The unemployment rate dipped lower to 4.1%, compared to 4.2% in August and below the market estimate of 4.2%. The markets have raised the odds of a 25-basis point cut at the Fed November meeting to 87%, compared to 65% one week ago. USD/JPY tested support at 147.89 earlier. Below, there is support at 146.78 There is resistance at 149.86 and 150.97
by OANDA
USD/JPY – Yen weakness prompts warning from TokyoThe Japanese yen is down for a third straight day and has declined 1.5% this week. USD/JPY has risen 0.43% on the day and is trading at 155.35 at the time of writing. Early Thursday, the BoJ will release the Summary of Opinions from the April meeting. Japanese officials remain mum about suspected interventions on the currency markets last week. The yen broke below the 160 line before recovering and surged 3.4% last week. However, the yen’s strength did not take long to dissipate and has dropped below the 150 level today. Previous interventions by Tokyo boosted the yen for only a short time and that appears to be the trend again. The Bank of Japan and the Ministry of Finance (MoF) weighed into the yen crisis earlier today. BoJ Governor Ueda said the central bank could take monetary action if the yen’s depreciation has a significant effect on prices. Ueda stated his readiness to tighten policy, saying that if inflation was higher than expected, it would be appropriate to adjust interest rates. Ueda’s remarks may be an attempt to provide the yen with a boost by sending a message that further rate hikes are on the table if inflation moves higher. Finance Minister Suzuki expressed “strong concern” over the weak yen and warned that he was ready to intervene to boost the yen. It seems questionable whether the warning will have much effect. The yen posted strong gains last week after suspected interventions but has already coughed up close to half of those gains. Barring another intervention, the yen could be on its way back to the 160 level. USD/JPY is testing resistance at 155.35. Above, there is resistance at 155.91 There is support at 155.01 and 154.43
by OANDA
USD/JPY volatile after inflation, BoJ meetingThe Japanese yen is swinging sharply on Friday. In the European session, USD/JPY is trading at 156.46, up 0.52%. It has been a busy Friday in Japan. Japanese inflation data, which was released just before the end of the Bank of Japan meeting, was much lower than expected. Tokyo Core CPI, which was overshadowed by the Bank of Japan’s meeting today, eased to 1.6% y/y in April, well below the market consensus of 2.2% and the March reading of 2.4%. This was the lowest level since March 2022. Tokyo core-core CPI, which excludes fresh food and fuel, slipped to 1.6% y/y in April, down from 2.4% in March and well below the market consensus of 2.7%. This was the lowest pace of inflation since September 2022. Core inflation is still running above the BoJ’s 2% target, but the Tokyo inflation data raises the question of whether domestic demand and wage growth will increase sufficiently to keep inflation sustainable at the 2% level. Governor Ueda has stated that the service inflation will be a key factor in determining the next rate hike. At today’s BoJ policy meeting, policy makers maintained the benchmark rate at 0%-0.1% and said they would maintain an accommodative policy “for the time being”. The rate statement did not address the yen, but Governor Ueda issued a warning at his press conference, saying, if yen moves have an effect on the economy and prices that is hard to ignore, it could be a reason to adjust policy”. The BoJ also raised its outlook for inflation in fiscal 2024 to between 2.5% and 3%, up from 2.2% to 2.5% in the January forecast. At the same time, it downgraded growth projections for fiscal 2024 to between 0.7% to 1%, down from 1% to 1.2% in January. USD/JPY tested resistance at 155.96 earlier. Above, there is resistance at 157.13 There is support at 154.13 and 153.47
by OANDA
USD/JPY ticks higher ahead of BoJ meetingThe Japanese yen continues to lose ground on Thursday. In the European session USD/JPY is trading at 155.61, up 0.17%. Earlier, the yen dropped to a 34-year low of 155.74. Friday will be a busy day out of Japan. Tokyo Core CPI, which excludes food, is a key leading indicator of nationwide inflation trends. It is expected to drop to 2.2% in April, down from 2.4% in March. The Tokyo core-core rate, which excludes food and energy, is also expected to fall, from 2.9% in March to 2.7% in April. The March reading marked the first time that the core-core rate fell below 3% since November 2022. Inflation played a key factor in the Bank of Japan’s historic decision in March to raise interest rates out of negative territory. The BoJ wants to see service inflation and wage growth to rise in order to ensure that inflation remains sustainable at the 2% target. The Bank of Japan meets on Friday as the Japanese yen continues to lose ground. The yen has lost about 10.4% against the US dollar in 2024 and this sharp descent in such a short period has set off alarm bells in Tokyo. The BoJ’s tightening in March hasn’t stopped the bleeding, as the BoJ has said that it will maintain an accommodative policy and the US/Japan rate differential remains hasn’t narrowed as the Fed has delayed rate cuts. BOJ expected to stand pat The BoJ is expected to maintain policy settings at the meeting but Governor Ueda may sound hawkish in order to provide some support for the yen. The meeting could turn out to be a non-event but the threat of intervention from the Ministry of Finance is sure to be on the minds of investors. The US releases the initial estimate for GDP for the first quarter. The market estimate stands at 2.5% y/y, compared to 3.4% in Q4 2023. The US economy has been robust and rising inflation has not only delayed rate cuts but there is even talk that the Fed could raise rates in order to put the brakes on inflation. USD/JPY tested support at 155.30 earlier. Below, there is support at 154.13 There is resistance at 155.96 and 157.13
by OANDA
USD/JPY jumpy as Japan’s core CPI easesThe Japanese yen showed some promise earlier, gaining as much as 0.48% against the US dollar as it rose to 153.59. However, it has pared those gains and is trading in Europe at 154.58, down 0.04%. Japan’s nationwide CPI, which excludes fresh food, rose 2.6% y/y in March, down from 2.8% in February but higher than the market estimate of 2.7%. Core CPI has now exceeded the Bank of Japan’s 2% target for 24 consecutive months. The deceleration was driven by a decrease in food inflation but the yen’s weakness prevented a sharper drop in inflation. The “core-core” CPI reading, which excludes fresh food and energy, dropped from 3.2% to 2.9% in March, below the forecast of 3%. This marked the first time that the index has fallen below 3% since November 2022. While consumer inflation continues to slow, the Bank of Japan is more focused on services inflation, as it believes that services inflation together with higher wage growth are the recipe to ensuring that inflation remains sustainable at the 2% target. The yen is down almost 10% since the start of the year and the sharp depreciation in such a short period has Tokyo concerned. The Ministry of Finance last intervened in the currency markets in late 2022 when the yen traded around 152. With the yen falling this week to 154.78, a 34-year old low, the markets are on alert for the possibility of another intervention. The weak yen could also have a significant impact on rate policy. On Thursday, BoJ Governor Kazuo Ueda said that the Bank might raise interest rates again if the yen’s decline led to a significant rise in inflation. The BoJ lifted rates out of negative policy in March but the yen has weakened since then. USD/JPY tested resistance at 154.43 earlier. Above, there is resistance at 154.71 There is support at 154.11 and 153.83
by OANDA
USD/JPY drifting at start of weekThe Japanese yen is showing limited movement on Monday. In the North American session, USD/JPY is trading at 151.25, down 0.13%. Last week’s Bank of Japan was dramatic as the central bank raised interest rates for the first time since 2007. The move did not catch the markets completely by surprise, as some media reports ahead of the meeting said the BoJ would raise rates and investors were looking at both the March and April meetings as strong possibilities for a rate hike. The yen did not respond to the rate hike with gains, as might have been expected. There are several reasons for this. First, the actual tightening was limited, with rates rising from -0.10% to 0.10%. This means that although the BoJ rate is now in positive territory, the move had little impact on the wide USD/JPY rate differential. BoJ Governor Ueda said after the meeting that despite the hike, monetary policy would remain accommodative, saying that there was “some distance to go” until inflation climbs to the 2% target. As well, many investors approached the BoJ meeting with a “buy the rumour, sell the fact” approach and this resulted in heavy selling of the yen after the rate announcement. The yen slipped 1.60% last week and dropped as low as 151.86, its lowest level since November 2023. The Japanese yen has dropped to levels that could invite intervention - the Ministry of Finance intervened last September and October when the yen dropped to around the 152 line. If the yen continues to lose ground, the threat of intervention will become greater. In the US, the markets have priced in three rate cuts this year, and the Fed also projected three cuts this year at last week’s meeting. However, Atlanta Federal Reserve President Raphael Bostic sounded hawkish on Friday when he said that he expects only one quarter-point cut this year. Bostic said that he was “definitely less confident than I was in December” that inflation will continue to drop towards the 2% target, as he noted that inflation remains stubbornly high and the US economy has been more resilient than he expected. USD/JPY is putting pressure on resistance at 151.44. Above, there is resistance at 151.88 151.02 and 15058 are providing support
by OANDA
USD/JPY soars as BoJ scraps negative ratesThe Japanese yen has taken a tumble on Tuesday. In the North American session, USD/JPY is trading at 150.67, up 1.02%. The Bank of Japan hiked interest rates for the first time since 2007 at today’s meeting and also abolished the yield control curve to target interest rate at specific levels. There was a strong possibility that the BoJ might wait until April to tighten policy, but the fact that the BoJ did not deny media reports that the central bank would act today meant that the markets were not shocked that the move occurred today. Interestingly, the yen has nosedived despite the BoJ tightening policy. This can be explained by the fact that the BoJ may have ended negative rates but the move was small, as rates have risen from -0.1% to a range of 0%-0.1%. This means that today’s rate hike did little to narrow the US/Japan interest rate differential. The BoJ’s announcement made huge headlines but at the end of the day the central bank kept a dovish tone, which also weighed on the yen. Governor Ueda stressed that the BoJ’s monetary policy will remain accommodative, even with the end of negative rates. Ueda noted that “there is still some distance to 2%, which would require maintaining an accommodative policy”. This means that the BoJ will not be entering a tightening cycle with a series of hikes as we’ve seen with the other major central banks in their battle to tame inflation. In the US, it’s a very light week, with no tier-1 events on the data calendar. The markets will be keeping a close eye on the Federal Reserve’s rate announcement on Wednesday. The Fed is virtually certain to maintain the benchmark rate of 5%-5.25%, and investors will be combing the rate statement for any insights about a date for an initial rate cut. USD/JPY has pushed above resistance at 149.98, which was protecting the 150 line. Above, there is resistance at 150.92 148.24 and 147.30 are providing support
by OANDA
USD/JPY yawns after BoJ CPI slipsThe Japanese yen is showing little movement on Tuesday. In the European session, USD/JPY is trading at 142.39, down 0.04%. Japanese inflation indicators have been heading lower. Last week, Core CPI, which excludes fresh food but includes fuel costs, dropped in November from 2.9% to 2.5%. On Tuesday, the Bank of Japan's Core CPI index followed suit and declined to 2.7% in November, down from 3.0% in October. Core inflation may have dropped in November, but it has exceeded the BoJ's 2% target for well over a year and speculation is high that the central bank will shift policy and lift interest rates from negative territory, perhaps in early 2024. Such a move would mark a sea change in monetary policy, after decades of negative rates. We have seen that tweaks to the yield curve control program have triggered sharp movement from the yen, and it's a safe bet that a shift in rate policy would send the yen flying higher. BoJ policy meetings have become market-moving events and every comment from a senior BoJ official has the potential to shake up the currency markets. BoJ Governor Ueda has hinted that the economy is slowly moving towards the BoJ target, but the central bank wants to see stronger wage growth before it considers inflation to be sustainable. The BoJ has insisted that current inflation is being driven by cost-push factors and is not sustainable. On Monday, Ueda said that he would consider shifting policy if the "cycle between wages and prices intensifies" but added that there was no specific timing to changing the Bank's ultra-loose policy. The US wrapped up last week with the PCE Price Index, the Federal Reserve's preferred inflation indicator. The headline reading fell to 2.6% y/y in November, down from a downwardly revised 2.9% in October and lower than the market consensus of 2.8%. The core rate eased to 3.2%, down from a downwardly revised 3.4% and lower than the market consensus of 3.3%. The numbers are welcome news for the Fed and support the case for rate cuts next year. Fed Chair Powell has pencilled in three cuts in 2024 but the markets have priced in up to six cuts. Investors have priced in a rate cut in January at 14%, up from 8% a week ago, according to the CME's FedWatch tool. USD/JPY is putting pressure on resistance at 142.55. Above, there is resistance at 142.78 There is support at 142.34 and 142.11
by OANDA
USD/JPY breaks above 146, Tokyo Core CPI dips to 2.8%USD/JPY has posted small gains on Friday, enough to push above the symbolic 146 line. On the data calendar, Tokyo Core CPI dipped lower and Fed Chair Powell addresses the Jackson Hole Symposium later today. Japan released the Tokyo Core CPI earlier today. This is the first inflation release of the month, making it a key event. In August, Tokyo Core CPI rose 2.8% y/y, down from 3.0% in July and just under the consensus estimate of 2.9%. Despite the drop in inflation, the indicator has remained above the Bank of Japan's 2% target for some fifteen months. Earlier in the month, the so-called "core-core index", which excludes fresh food and energy, remained at 4.0%. This points to broad inflationary pressure and raises questions about the BoJ's insistence that inflation is transient. The BoJ has said it will not exit its ultra-loose monetary policy until wage growth rises enough to keep inflation sustainable around 2%. Still, the markets have been burned before by the BoJ making unexpected moves and are on guard for the BoJ tightening policy, especially with the yen at very low levels. The markets are keeping a close eye on the Jackson Hole symposium, with Fed Chair Powell and BoJ Governor Ueda both attending. Powell delivers a key speech on Friday and Ueda will participate in a panel discussion on Saturday. If either one provides insights into future rate policy, it could mean some volatility from USD/JPY on Monday. What does the Fed have planned? That depends on which Fed member is addressing the media. Philadelphia Fed President Patrick Harker said on Thursday that he didn't see a need to raise rates further, absent any unexpectedly poor data, but added that the Fed wouldn't be lowering rates anytime soon.  However, Boston Fed President Susan Collins said that rate increases might still be necessary. The Fed is likely to pause at the September meeting, but what happens after that is unclear. USD/JPY is facing resistance at 146.41, followed by 147.44 There is support at 145.54 and 144.51
by OANDA
Japanese yen sinks as inflation risesThe US dollar continues to rally as the Japanese yen is down for a fourth straight day. In Friday's European session, USD/JPY is trading at 141.93, up 1.33%. The yen has taken investors on a roller-coaster ride. The Japanese currency surged 2.37% last week against the greenback but has reversed directions and dropped 2.15% this week. Japan’s core inflation (excluding fresh food) ticked higher to 3.3% y/y in June, up from 3.2% in May and matching the consensus estimate. Core core inflation (excluding fresh food & energy) dipped lower to 4.2% y/y, down from 4.3% in May and matching the consensus. The readings indicated that the inflation picture barely changed in June, but that's not really good news for the Bank of Japan. The core CPI has now stayed above the BoJ's 2% target for the 15th straight month. BoJ Governor Ueda has continued the Bank's ultra-loose policy despite high inflation, insisting that inflationary pressures are temporary. This stance, however, is becoming increasingly untenable as inflation has been persistently high and is not showing any signs of falling. Friday's inflation numbers come just a week before the BoJ's meeting, and there is speculation that the central bank could phase out its yield curve control (YCC) policy that has been distorting bond pricing. A change to YCC would almost certainly send the yen sharply higher, which was the case late last year when the BoJ stunned the markets and widened the target band for 10-year government bonds. Earlier this week, Governor Ueda poured cold water on any change in policy, but this could be an effort to scare off speculators looking for a tweak to YCC. It seems more likely than not that the BoJ will maintain policy settings at next week's meeting, but a shift is certainly on the table, especially with the yen floundering near the 142 line. USD/JPY has pushed past resistance at 1.4067 and 141.28. There is weak resistance at 142.12, followed by 142.62 There is support at 139.68 and 138.52
by OANDA
USD/JPY extends rally ahead of BOJ Core CPIThis week's data calendar out of Japan will be dominated by inflation releases and the Bank of Japan's two-day meeting at the end of the week. Traders will be keeping a close eye on BoJ Core CPI, which will be released on Tuesday. The index, which is the BoJ's preferred inflation gauge, fell from 3.1% to 2.7% in February. Another drop would support the central bank's view that inflation is falling back towards the 2% target. Inflation has been running above 3% and this has raised speculation that the BoJ will respond by tightening policy, which would likely send the yen sharply higher. The BoJ has insisted that it will not tighten until it is convinced that higher inflation is sustainable and not a result of more expensive goods and raw materials. The uncertain outlook for global growth and a weak domestic economy means that the BoJ is in no rush to shift policy. New Governor Ueda has been consistent in his message that he will maintain an ultra-loose policy, but nonetheless, speculation continues that the BoJ will tweak or even abandon its yield curve control, which has been criticised for distorting bond market pricing. I suspect that speculators hoping for a shift in policy that will send the yen higher will be disappointed after this week's meeting, as Ueda is unlikely to rock the boat at his first meeting. The BoJ will provide updated quarterly growth and inflation forecasts, which could provide a hint as to future monetary policy. USD/JPY is testing resistance at 1.3427. Next, there is resistance at 1.3499 133.41 and 1.3269 are providing support
by OANDA
USDJPY Outlook 11 April 2023With the overnight strength of the DXY, the USDJPY climbed steadily to the upside, as the price approached the 134 round number resistance area. Weakness in the Japanese Yen was also compounded by the statement from the new BoJ Governor Ueda, indicating that large scale monetary easing policy will continue. This was in contrary to the market anticipation that Governor Ueda could trim back on easing. While the USDJPY retraces from the resistance level, look for the price to bounce from either the 23.60% fib level which is also the 133 round number level, or more likely at the 132.60 price level which is the 38.20% fib level and the upward trendline providing support. Further upside on the USDJPY could see the price climb steadily toward the 135 key resistance level.
Long
by JinDao_Tai
USD/JPY - Yen slides as Ueda says no plans for policy shiftBank of Japan Governor Ueda spoke at his first news conference as head of the central bank today. It wasn't quite a State of the Union address, but Ueda's message was clear - the current monetary policy was appropriate and he had no plans to make any major shifts. There has been strong speculation that Ueda will make some significant moves, perhaps not right away but in the next few months. After years of battling deflation, Japan is facing inflation which has risen above the BoJ's 2% target. The US/Japan rate differential has been widening as the Fed continues to raise rates while the BoJ has capped yields on 10-year government bonds and interest rates remain negative. The changing of the guard at the BoJ seemed to some as an opportunity for BOJ policy makers to take some steps toward normalization, such as tweaking or even removing yield curve control. Ueda poured cold water on this sentiment, stating that, “Right now, the yield curve control is considered most appropriate for the economy while tending to market functionality”. Ueda's message of "stay tuned for more of the same" has lowered expectations of a policy shift at the April 28th meeting and the yen has responded with sharp losses. Japan's consumer confidence gave policy makers something to cheer about, rising to 33.9 in March, vs. 33.1 prior and 30.9 anticipated. This was the highest level since May 2022, although consumer confidence remains deep in negative territory, below the 50-level which separates contraction from expansion. The week ended with a solid US employment report. The economy added 236,000 jobs last month, within expectations and softer than the upwardly revised 326,000 reading in February. The labour market is cooling but has been surprisingly resilient to relentless rate hikes and the odds of a 25-bp rate hike have increased to 68% according to the CME Group, compared to around 50% prior to the employment report release. There is resistance at 133.74 and 135.31 132.18 and 131.67 are providing support
by OANDA
The end of an era.This week, the Bank of Japan governor’s Kuroda’s decade long term comes to an end. As such we would like to take some time to review what this means for the Yen and in particular, the AUDJPY. Firstly, central bank timings. In case you missed it, last Tuesday the Reserve Bank of Australia (RBA) snapped its consecutive 10 rate hikes, being the second major central bank in developed markets to pause after the Bank of Canada. On the other hand, the Bank of Japan’s (BOJ) inaction thus far, is in stark contrast to the rest of the world. Kuroda officially ends his second 5-year term. With the new Governor Ueda at the helm, we think a move away from the current policy stance is very likely for BOJ as inflation remains uncharacteristically high for Japan and unemployment still relatively contained. A shift in the BOJ’s policies could mean the end of the largely debatable Yield Curve Control (YCC) policies, either in the form of abandonment or yet another change to the policy band or target yield as it repeatedly trades close to the upper limit of the currently allowed range. In fact, the OIS Implied rates for the 10-year Japanese gov yields show a huge disparity from the BOJ’s policy ceiling of 0.5%. While it has corrected from the high, it still trades north of the 0.5% cap by a clear margin, indicating market participants’ expectations that the yield cap is likely to be abandoned or shifted higher again. Coincidentally, the BOJ can take a page out of the RBA’s book, where RBA faced an almost identical situation, when in 2021 it was forced to abandon its three-year yield target. Once it lost control, yield quickly shot up there after. If or when the BOJ lose control of its YCC program, this warrants a peek into what might happen to Japanese Yields. Market expectations of forward rates are completely opposite for these two countries, with participants expecting the RBA to execute multiple rates cut through 2023, while Japan is expected to hike rates. So what does this mean for the currency pair? Well one way to look at this is the real yield differential between Japan (JP) and Australia (AU). When the AU – JP yield differential collapses, the AUDJPY tends to follow suit. If RBA is to hold rates, while the BOJ is to raise, we could see this yield differential collapse from here, paving the path for the next downward move in the currency pair. On the technical front, the AUDJPY is trading near its upper resistance of a four decade long descending triangle. On a daily timeframe, although the pair's first attempt to break below the 88 handle was short-lived, it now sits just above this support, which could lead to a second coming. Of course, such a trade might take a while to play out given the decade long chart pattern as well as fundamental factors such as central banks’ policy shifts. Looking ahead, the next potential catalyst could be the Bank of Japan’s first meeting under a new leadership on the 27/28th of April, while the RBA’s next meeting is scheduled for 2nd of May. To express this view, one option is to use the CME AUDJPY currency pair, which allows you to short the currency pair directly. Alternatively, if liquidity and contract size are of concern, the same view can be expressed by selling one Micro USDJPY Futures and buying two Micro AUDUSD Futures to construct a synthetic AUDJPY pair. Setting up the AUDJPY currency pair this way allows a more palatable trade as the notional amount is on roughly 20,000 AUD or 10,000 USD. This synthetic set-up allows us to access a more liquid market in both contracts compared with the full sized one. Using the descending triangle structure as a guide, we set our stops at 94, close to the previous resistance and our take profit at 70. The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description. Reference: www.cmegroup.com www.cmegroup.com
Short
by inspirante
USD/JPY jumps after solid nonfarm payrolls releaseUSD/JPY has posted gains in the North American session after a solid showing from US nonfarm payrolls. Japan's real wages continued to fall, while household spending rebounded. In the North American session, USD/JPY is trading at 132.24, up 0.36% on the day. In the US, nonfarm payrolls was within expectations, easing concerns that the US labour market is in trouble. The economy added 236,000 in March, close to the market consensus of 240,000. This was a solid reading, although weaker than the February reading of 311,000. The US dollar posted gains against the majors after the release, after concerns that a soft reading might force the Fed to take a pause in its rate hikes. Japan's real wages fell in February for the 11th straight month, falling by 2.6%. Household purchasing power continues to drop, but this was an improvement over the -4.6% release in January, as government energy subsidies helped curb inflation. Household spending rose 1.6% in February, rebounding from -0.3% in January but well off the market consensus of 4.3%. The Bank of Japan doesn't meet until April 28th, but Governor Ueda will be under the magnifying glass, as he chairs his first meeting at the helm of the central bank. The economy is showing signs of improvement, with retail sales and industrial production accelerating in February. Inflation remains very low compared to other major economies but is still high for Japan. In February, CPI fell to 3.3%, down from 4.3% in January but above the BoJ target of 2%. There has been considerable speculation that Ueda could shift policy and tweak or even abandon the Bank's yield curve control policy. This move could have huge significance for the yen - when the BoJ widened the yield target band in December, the yen posted sharp gains. Ueda hasn't revealed any cards about what he might do at his first meeting. He has toed the line of the previous Governor, Haruhiko Kuroda, that the BoJ won't tighten until inflation is sustainable, and that would require higher wage growth. Wage growth has been falling, so any tightening moves such as raising interest rates do not appear imminent. USD/JPY is testing resistance at 132.27. Above, there is resistance at 133.45 130.94 and 129.09 are providing support
by OANDA
USD/JPY - yen slips after BoJ maintains policy settings The Japanese yen is trading at 1.36.83 in the European session, down 0.52%. USD/JPY fell 0.90% on Thursday but has recovered much of those losses today. Bank of Japan Governor Kuroda didn't fire any final shots at his final meeting today. The BoJ maintained interest rates at -0.1%, where they have been pegged since 2016, and didn't make any changes to its to yield curve control (YCC) policy. Traditionally, BoJ governors do not make waves at their final meeting, but there was an outside chance that Kuroda might buck the trend. Kuroda has surprised the markets in the past, most notably when he widened the yield curve band in December and jolted the markets. This time, Kuroda stayed on the sidelines and the yen responded with losses as some investors were disappointed that he didn't tweak the YCC. Kazuo Ueda takes over as BoJ Governor next month, and there is growing speculation that Ueda will change forward guidance and tweak or even abandon YCC, as distortions in the yield curve are damaging the bond markets. Ueda may not press the trigger when he chairs his first meeting in April but is expected to shift policy in the coming months. The US releases its February employment report, highlighted by nonfarm payrolls, later today. The blowout January reading of 517,000 is widely seen as a blip, although the labour market remains surprisingly resilient, despite the bite of rising interest rates. The estimate for February stands at 205,000 and a wide miss of this figure on either side will likely shake up the US dollar.  A weak reading would fuel speculation of a Fed pivot and likely weigh on the US dollar, while a strong figure would support the Fed's hawkish stance and should be bullish for the greenback. The Fed will also be keeping a close eye on wage growth, in addition to nonfarm payrolls. Average hourly earnings are expected to rise to 4.7% y/y in February, up from 4.4% y/y in January. Higher wages drive inflation higher and an acceleration in wage growth would complicate the Fed's battle to curb inflation. 136.06 is under pressure in support. 13502 is next 136.86 and 1.37.90 are the next resistance lines
by OANDA
USD/JPY dips as Tokyo Core CPI slowsThe Japanese yen has gained ground on Friday. In the European session, USD/JPY is trading at 136.17, down 0.44%. There was some positive news on the inflation front, as Tokyo Core CPI for February slowed for the first time since January 2022. The indicator was expected to rise from 4.3% to 4.5%, but instead reversed directions and fell to 3.3%. The sharp drop was not a complete surprise, as it was driven by government subsidies, including a 20% reduction in household electricity bills, which took effect in February. Without the subsidies, it's likely that the Tokyo inflation figure would have come in around 4.5%. It's unclear how long the government will continue these subsidies, which means that the inflation picture remains uncertain. The Bank of Japan has insisted that rising inflation is transient and is a result of external factors such as high commodity prices rather than domestic inflationary pressures. The central bank has insisted on maintaining its massive stimulus programme even though inflation has been on the upswing and is more than double the BoJ's target of 2%. All eyes are on the Bank of Japan, as the changing of the guard looms ever closer. BoJ Governor-elect Kazuo Ueda will take over the helm from Haruhiko Kuroda in early April. Ueda has been careful not to make any waves at his confirmation hearings, saying that the central bank's current policy is appropriate. Still, the markets aren't convinced that Ueda will maintain Kuroda's ultra-loose policy, especially with rising inflation. The BoJ's yield curve control (YCC) policy has damaged the bond markets and there is speculation that Kuroda could make a grand exit at his final meeting on March 10 and tweak YCC in order to relieve pressure on Ueda. There is resistance at 137.37 and 138.24 135.65 and 134.78 are providing support
by OANDA
Looking for a bullish breakout from USD/JPY's consolidationA bullish engulfing candle formed on Friday thanks to a hot US inflation report. The fact that incoming BOJ governor Ueda delivered a dovish message at his confirmation hearing simply adds to our bullish conviction on USD/JPY. Prices are now consolidating on the 1-hour timeframe, so we'd welcome any pullback towards the weekly pivot point to consider long setups, with the next bullish target sitting around the weekly R1 pivot (137.30). The OBV remains elevated to suggest the rally has been supported by bullish volume, so we're also on guard for a bullish breakout from the current consolidation.
Long
by CityIndex
Yen jumps on report of BoJ appointmentIt has been a busy day for the Japanese yen, which jumped as much as 1.1% today before paring most of those gains. In the European session, USD/JPY is trading at 131.04, down 0.37%. The Japanese yen posted sharp gains after a Nikkei report that Kazua Ueda would be selected as the Bank of Japan's next governor. Ueda is a former member of BoJ's policy board and will replace Haruhiko Kuroda in early April. The yen's gains, although only lasting a short time, indicate that Ueda is expected to take a more hawkish stance than Kuroda, who was the architect of an ultra-loose monetary policy that has largely remained in place even while other major banks have been hiking rates to tackle inflation. The question of who will become the next BoJ Governor has resulted in volatility for the yen. Earlier this week, a report that Deputy Governor Masayoshi Amamiya had been approached for the position sent the yen lower for a brief time, as Amamiya is considered a dove. Amamiya declined the offer and if the latest report is accurate, things should get very interesting under the helm of the hawkish Ueda. US unemployment claims rose for the first time in six weeks, from 183,000 to 196 thousand, which was above the consensus of 190,000. Still, this marked a fourth week of claims below the 200,000 level. The four-week moving average, which smooths out much of the week-to-week volatility, actually edged lower to 189,250. This is an indication that the labour market remains tight, despite reports of mass layoffs by Amazon, Facebook and other large companies. USD/JPY tested support at 130.71 earlier. The next support line is 129.12 There is resistance at 132.23 and 133.27
by OANDA
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