Jump to content

USD/JPY Currency Outlook: US Inflation Data to Test the Yen’s Resolve


Recommended Posts

USD/JPY, JAPANESE GOVERNMENT BONDS, NEWS AND ANALYSIS

  • BoJ’s yield curve control coming under pressure despite unlimited purchases
  • USD/JPY finding support at 121.20 – key technical levels considered
  • The Yen’s recent resilience is likely to be tested later this week with US PCE and NFP data due on Thursday and Friday respectively
 

The Japanese Yen has retraced a fair amount since its drastic depreciation beginning on March the 11th where we saw a topside breakout from the ascending triangle. USD/JPY has subsequently turned lower, largely due to a softer dollar and positive reports regarding Russia-Ukraine peace talks which lessened the greenback’s safe-haven appeal.

THE BOJ’S UPHILL BATTLE WITH YIELD CURVE CONTROL

The Bank of Japan (BoJ) entered a third day of large-scale bond buying, offering to buy more than 2 trillion yen’s worth of Japanese Government Bonds (JGBs), over and above the unlimited purchases of 10-year JGBs at a fixed rate of 0.25%.

The 10-year yield is something that has come under scrutiny lately as global rising yields have taken the rate towards, and slightly above, the 0.25% cap. On Wednesday however, we did see the effects of the BoJ’s efforts as the 10-year yield turned a fair bit lower.

The BoJ is determined to keep interest rates low, in line with its accommodative monetary policy stance to support the local economy. BoJ Governor Kuroda recently noted the Yen’s depreciation and general volatility but insists that the benefits of the depreciation outweigh the negatives.

Japanese 10 Year Government Bond Yield

USD/JPY Currency Outlook: US Inflation Data to Test the Yen’s Resolve

Source: TradingView, prepared by Richard Snow

USD/JPY KEY TECHNICAL LEVELS

USD/JPY quickly retreated from the 125 level and after two days in the red appears to have found the first level of support at the prior lower wick of 121.20. A decisive move lower resulting in a daily close below 121.20 opens the door to the 120 psychological level.

However, the bullish continuation theme could be supported if we are to see hotter PCE inflation and further improvements in the already strong US labor market. Aggressive US rate hike bets also favor dollar strength, particularly off recent lower levels seen in the dollar index (DXY) – a general benchmark for USD performance. A close above 121.85 leaves the door open for a retest of the 124.15 and 125 levels.

USD/JPY Daily Chart

USD/JPY Currency Outlook: US Inflation Data to Test the Yen’s Resolve

Source: TradingView, prepared by Richard Snow

MAJOR RISK EVENTS AHEAD

With Japanese data rather light, the focus shifts to the US regarding the PCE Price Index (the Fed’s referred measure of inflation) and the non-farm payroll data with and additional 490k jobs to be added in March. With inflation trending higher and a really strong US labour market, better than expected figures would likely boost the dollar and USD/JPY, especially off the lower levels we have seen over the last 48 hours.

USD/JPY Currency Outlook: US Inflation Data to Test the Yen’s Resolve

Customize and filter live economic data via our DaliyFX economic calendar

 

 

 

--- Written by Richard Snow for DailyFX.com. 30th March 2022

Link to comment

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
  • General Statistics

    • Total Topics
      23,568
    • Total Posts
      96,869
    • Total Members
      44,139
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    rama1
    Joined 29/11/23 08:50
  • Posts

    • Analog Devices Inc., Elliott Wave Technical Analysis Analog Devices Inc., (ADI:NASDAQ): 4h Chart 29 November 23 ADI Stock Market Analysis: We have been looking for upside on Analog Devices as 183$ as been acting as tested support for some days now. Looking for continuation higher into Minor Group 2 and potentially all the way up into 200$.   ADI Elliott Wave Count: Wave {iv} of 1. ADI Technical Indicators: Below 20EMA. ADI Trading Strategy: Looking for longs into wave {v}. TradingLounge Analyst: Alessio Barretta Source : Tradinglounge.com get trial here!         Analog Devices Inc., ADI: 1-hour Chart 29 November 23 Analog Devices Inc., Elliott Wave Technical Analysis ADI Stock Market Analysis: Looking for some sort of complex correction into wave {iv} as we are moving sideways, alternating with the corresponding wave {ii}.   ADI Elliott Wave count:  Wave (y) of {iv}. ADI Technical Indicators: Above all averages.   ADI Trading Strategy: Looking for longs into wave {v}.    
    • The poor performance of Chinese stocks continues, with the Hang Seng down sharply overnight, bucking a slightly more positive session for Asian markets. Previous Fed hawk Christopher Waller made waves by hinting that the Fed might begin to cut rates relatively soon if the decline in inflation continued, in order to engineer its much-vaunted 'soft landing' for the US economy. This gave risk appetite a lift in what was otherwise a generally quiet session. Australian inflation came in below forecasts, though the New Zealand central bank warned markets that more hikes could still be on the table if inflation did not ease. German inflation, the second estimate of US Q3 inflation and weekly EIA oil inventories are on the calendar for the day.   
    • USD/CAD Elliott Wave Analysis Trading Lounge Day  Chart, 29 November 23 U.S.Dollar /Canadian Dollar(USD/CAD) Day Chart USD/CAD Elliott Wave Technical Analysis Function:   Counter Trend Mode: corrective   Structure: blue wave C  of black wave B Position: black wave B Direction Next Higher Degrees:black wave C Details: Blue wave B looking completed at 1.37679 , now blue wave C of black wave B is in play and near to end between fib level 50.00 to 61.80 . Wave Cancel invalid level:1.30878 The "USD/CAD Elliott Wave Analysis Trading Lounge Day Chart" dated 29 November 23, delves into a detailed analysis of the U.S. Dollar/Canadian Dollar (USD/CAD) currency pair using Elliott Wave principles. This analysis is focused on a day chart, offering insights into longer-term trends and corrective movements. The primary "Function" identified in the analysis is "Counter Trend," suggesting a focus on potential reversals or corrective movements against the prevailing trend. The current "Mode" is classified as "corrective," indicating that the market is currently undergoing a correction rather than a strong, impulsive move. The specific "Structure" being examined is "blue wave C of black wave B." This indicates a meticulous exploration of the ongoing correction within the broader structure of black wave B. The identified "Position" is "black wave B," highlighting the larger degree wave within the Elliott Wave structure. This implies that the analysis is centered on a correction within a broader upward trend. The directional guidance for "Next Higher Degrees" is "black wave C," signaling that the broader corrective structure is expected to continue with the development of black wave C after the completion of blue wave B. Regarding "Details," the analysis notes that "Blue wave B looking completed at 1.37679," suggesting that the corrective wave at the lower degree (blue wave B) is potentially reaching its completion point. Additionally, "blue wave C of black wave B is in play and near to end between fib level 50.00 to 61.80." This indicates an expectation of the final stages of the corrective move within the specified Fibonacci retracement levels. The "Wave Cancel invalid level" is set at 1.30878, serving as a crucial reference point. This level acts as a guide for potential invalidation of the current wave count, providing traders with a key level to monitor for confirmation or reversal signals. In summary, the USD/CAD Elliott Wave Analysis on the day chart suggests that the currency pair is in a corrective phase within the broader upward trend. Traders are provided with insights into potential reversal levels and key reference points for decision-making over a more extended time horizon. Technical Analyst : Malik Awais Source : Tradinglounge.com get trial here!    
×
×
  • Create New...
us