USDJPY Analysis: The Yen Halts Dollar Winning Steak on High Inflation Data

Summary:
• The USDJPY currency pair has broken downwards after eight days on the rise, with the yen the only winner against the dollar in the DXY index.

USDJPY’s run of eight consecutive daily wins came to an end during the late European session on Friday, as hot Japanese inflation data weighed in. The pair traded at 151.200, having lost 0.28% at the time of writing.  The yen is the only currency in the DXY dollar index in a winning position against the US dollar as of this writing, underlining the dollar’s current attractiveness and strength.

The US economy printed an array of better-than-expected economic data on Thursday, providing more propulsion to US dollar that was supported by the Fed’s interest rate decision. Initial Jobless Claims, S&P Global US Manifacturing PMI, Philadelphia Manufacturing Index  and Existing Home Sales data all beat the forecast estimates. The strong show by the US economy provides strong support for the dollar in the near term.

Japan’s National Core CPI (excluding fresh food) rose by 0.8% year-on-year in February to 2.8% as the overall CPI remained unchanged. This supports BoJ’s recent interest rate hike, as the country’s policymakers pursue their target inflation figure of 2%.

The reversal of the dollar’s gains against the yen certainly takes some pressure off policymakers as the market has come to believe that a move to 152.00 would prompt intervention by the BoJ. Japan’s Finance Minister Shunichi Suzuki reiterated this standpoint two days ago, when he said that the government is watching the USDJPY exchange rate with “a high sense of urgency”. The USDJPY pair also has support from US Treasuries, whose yields have fallen below 4.300% on the benchmark 10-year bonds.

Technical analysis

USDJPY pivots at 151.85, and the RSI indicator currently signals control by the sellers. The downward momentum will be sustained if the sellers keep the exchange rate below the pivot. The resultant momentum could break the support at 150.80 in extension and potentially test 150.30. However, move above 150.85 will move control to the buyers, who will meet the first resistance at 152.30. A continuation of the buying momentum will break the resistance, nullifying the downside narrative and potentially testing the next resistance at 152.80.