Jump to content

Daily brief: USD/JPY trades at support as APAC markets look higher ahead of Japanese inflation



Asia-Pacific markets set to rebound after US stocks rise as dollar strength pauses and Japanese inflation data to show rising prices, but unlikely to influence the BOJ and USD/JPY trades at support.

Source: Bloomberg

Tuesday’s Asia-Pacific outlooks

Asia-Pacific markets look set to open higher following a bullish New York trading session. The tech-heavy Nasdaq-100 Index (NDX) led stock gains in New York, closing 0.77% higher, and the S&P 500 gained 0.69%. The VIX ‘fear-gauge” index fell 2.01%. The FOMC will likely dictate market direction later this week, with the base-case scenario calling for a 75-basis point hike. Rate traders see a 1-in-5 chance for a larger 100-bps hike.

The US dollar DXY Index was little changed despite rising short-term Treasury yields. Crude oil prices traded nearly flat as traders weigh the impact of rising global interest rates. Markets expect the Swiss National Bank (SNB) to hike rates into positive territory as inflation and a relatively strong currency bolster the SNB’s stance to tighten policy. A rate hike from the Bank of England is also on tap later this week.

Japan’s inflation rate is due this morning, with analysts expecting to see the nationwide consumer price index (CPI) for August to hit 2.9%, according to a Bloomberg survey. That would be up from July’s 2.6%. The increased rate, or even a higher-than-expected print, is unlikely to sway policymakers at the Bank of Japan from easy monetary policy, as Governor Kuroda sees price pressures as temporary. Although, Mr Kuroda will likely take a hard stance against JPY shorts.

The September minutes from the Reserve Bank of Australia’s meeting will cross the wires. Traders are buying AUD versus the New Zealand dollar, pushing AUD/NZD to its highest level since 2016. Rate bets for the October RBA meeting have increased towards favoring a 50-bps hike. Meanwhile, the RBNZ has already front-loaded much of its policy response, and New Zealand’s trade balance faces mounting headwinds.
Elsewhere, the South African Rand dropped to its lowest level versus the Greenback since early 2020.

The country’s power utility company implemented a Stage 6 alert on Sunday, mandating six hours of power cuts over a 24-hour period. European natural gas prices fell around 3%. And China’s central bank is expected to keep its 1- and 5-year loan prime rates unchanged today.

USD/JPY technical outlook

USD/JPY is trading above the supportive 9-day Exponential Moving Average (EMA) and a trendline from early September. A move higher would challenge resistance at 144.99. An Ascending Triangle pattern implies a bullish bias, but it would require another contact high. The Relative Strength Index (RSI) is flashing a bearish divergence, and MACD is subdued near its midpoint. A break below support could open the door for a pullback into early September levels.

USD/JPY four-hour chart

Source: TradingView

Thomas Westwater | Analyst, DailyFX, New York City
20 September 2022

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.


Recommended Comments

There are no comments to display.

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • Create New...