The USDJPY is only mildly lower on the day even as the US CPI and Core CPI figures came in lower than expected on Friday. The US CPI reading came in at -0.4%, which was lower than the -0.3% that the markets were expecting and also much lower last month’s figure of 0.1%. The US Core CPI registered at -0.1%, which was lower than the market estimate of 0.1% and also the previous number of 0.2%.
Lower crude oil prices, which has led to a fall in the domestic price of gasoline, was responsible for the sharp drop in the gasoline index and a significant contributor to the downbeat CPI data. The 10% drop in the gasoline index component of the report was able to outstrip the food index, which rose 0.3%. This is the first time since January 2010 that the US Core CPI would witness a monthly decline.
Trading volumes are low on the USDJPY as most banks are closed for the Easter weekend.
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Today’s downbeat data on the back of low trading volumes have allowed the USDJPY to pull back towards the immediate support at 108.42. This price level has been tested several times, both as a support and resistance level. A breakdown of the 108.42 support level could take the USDJPY down to the 107.82 price area, with the possibility of a further extension to the 107.03 price level which acted as support on the 2nd and 3rd of April 2020.
On the flip side, a bounce from the present price level brings 109.30 into focus. Price advance could bring 109.70 into relevance, with the 110.58 price level constituting a target that would also allow the upper border of the long-term triangle to come under challenge.