Usdjpy drops as Tokyo cpi rise fuels inflation concerns in Japan

USDJPY Analysis

Performance after Thursday
Period	Pct	Chg	Momentum
Thursday	-0.31%	-44.8 Pips
Week to-date	0.51%	72.1 Pips
April	-4.7%	-704.8 Pips

Upcoming key events (London Time)

Fri 12:30 AM JPY Tokyo CPI (Inflation Rate) (12-mth)
Fri 12:30 AM JPY Tokyo CPI excluding fresh food and energy (12-mth)

What happened lately

In Japan, the inflationary trends are becoming more pronounced, as evidenced by the latest data showing a significant rise in the Tokyo Consumer Price Index (CPI). In April, the Tokyo CPI, excluding fresh food and energy, increased to 2%, up from 1.1% in March. Meanwhile, the overall Tokyo CPI rose to 3.5% year-over-year in April from 2.9% in March. The Tokyo CPI, excluding fresh food, also showed a sharp increase to 3.4%, a rise from 2.4% in March. This upward movement in inflation rates suggests mounting price pressures within the Japanese economy, primarily driven by rising costs of goods and services, which could potentially prompt discussions about tightening monetary policy measures in the future. However, the current target of the Bank of Japan is to accommodate economic growth and support inflation, which means any interest rate hikes may not be imminent.

In the United States, economic indicators paint a mixed picture. The initial unemployment claims rose slightly to 222K for the week ending April 19, indicating some softening in the labor market. On the positive side, nondefense capital goods orders, excluding aircraft, inched up by 0.1% in March, showcasing a modest rebound from the negative territory of February. Yet, the durable goods orders excluding transportation remained flat, a reduction from the 0.7% growth seen in the previous month. However, overall durable goods new orders saw a robust increase of 9.2% in March, showcasing a significant recovery from February’s revised 1%. Durable goods orders excluding defense surged by 10.4% in March. Furthermore, new-home sales showed strong resilience, climbing by 7.4% in March, an improvement from the previous month’s 1.8%. Collectively, these data points illustrate a nuanced recovery in certain sectors of the U.S. economy, but also highlight areas facing stagnation, emphasizing the ongoing recovery’s uneven nature.

The USD/JPY exchange rate sees slight downward pressure, closing at 142.68, down by 0.31%. The improved inflation numbers in Japan could, over time, influence a stronger yen if the Bank of Japan hints at any future policy shifts to address rising inflation, although such changes are unlikely in the near term. Concurrently, while some U.S. economic indicators suggest recovery, the overall unemployment claims and flat core durable goods orders could exert minor downward pressure on the U.S. dollar. These dynamics place the USD/JPY pair in a state of consolidation for now, with potential fluctuations hinging on forthcoming economic data releases and any strategic policy announcements.

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What can we expect from USDJPY today?

USDJPY on Thursday dropped -0.31% to 142.68. Price is below 9-Day EMA while Stochastic is rising.

Updated daily direction for USDJPY looks mixed as the pair is likely to consolidate above 142.19 (S1).

Looking ahead today, to see upside interest, we prefer to look at price breakout of last daily high of 143.34 or trades above daily pivot 142.76. While to the downside, the daily low of 142.27 and 142.19 (S1) as immediate support levels. USDJPY need to break on either side to indicate a short-term bias. A close below 142.27 would indicate selling pressure.

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

Key levels to watch out: