Usdjpy rises amid mixed economic signals from us and japan

USDJPY Analysis

Performance after Tuesday
Period	Pct	Chg	Momentum
Tuesday	0.28%	43.9 Pips
Week to-date	0.05%	7.701 Pips
January	0.62%	96.901 Pips

Upcoming key events (London Time)

Wed 01:30 PM USD CPI Inflation Rate (12-mth)
Thu 01:30 PM USD Monthly Retail Trade (1-mth)

What happened lately

In the United States, the Monthly Treasury Budget Statement saw a marked improvement in December, recording a deficit of -$87 billion compared to -$367 billion in November. This reflects a significant contraction in the government’s budget shortfall. Meanwhile, the Producer Price Index (PPI) excluding food and energy remained stagnant at 0% in December, down from 0.2% in November. However, when viewed on an annual basis, the 12-month PPI increased to 3.3% in December, from 3% previously. Similarly, the PPI for December at a one-month view decreased to 0.2%, showing a slowdown compared to November’s rate of 0.4%. Notably, the 12-month PPI excluding food and energy rose slightly to 3.5% from 3.4%. These variations suggest a mixed inflationary picture, indicating fluctuations in costs for producers which could influence future pricing strategies and economic policy decisions.

In contrast, Japan experienced an increase in its current account surplus, with the non-seasonally adjusted balance expanding to 3352.5 billion yen in November from 2456.9 billion yen in October. This denotes a robust increment in Japan’s trade and investment income during this period, likely supported by favorable export conditions or investments overseas yielding better returns.

These economic insights have implications for the USD/JPY currency pair. The rise in Japan’s current account surplus indicates stronger yen inflows, potentially appreciating the yen. However, reflecting on the U.S. side, the sharper reduction in the Treasury budget deficit might underpin a stronger dollar if seen as indicative of improving fiscal health. The mixed signals from the U.S. PPI could moderate inflation expectations, affecting currency dynamics. During the latest trading session, the USD/JPY rose by 0.28% to 158.01, but remains in consolidation, which suggests the market is cautious and perhaps awaiting further cues from high-impact upcoming U.S. economic releases, namely the CPI inflation rate and monthly retail trade data. These events could significantly influence investor sentiment and move the USD/JPY accordingly, depending on how they meet or defy market expectations.

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What can we expect from USDJPY today?

USDJPY on Tuesday rose 0.28% to 158.01. Price is above 9-Day EMA while Stochastic is falling.

Updated daily direction for USDJPY looks mixed as the pair is likely to consolidate above 157.29 (S1).

Looking ahead today, to see upside interest, we prefer to look at price breakout of last daily high of 158.20 or trades above daily pivot 157.75. While to the downside, the daily low of 157.03 and 157.29 (S1) as immediate support levels. USDJPY need to break on either side to indicate a short-term bias. A break above 158.20 would suggest bullish bias after recent positive movement.

For the week to-date, take note that USDJPY is mixed as compared to prior week.

Key levels to watch out: