- Summary:
- The yen sits at a precarious position as the dollar builds on inflation data and BoJ interest rate dilemma to push up USDJPY.
The dollar rose against the yen in Wednesday’s New York session trading, as traders bet on bullish dollar fundamentals in the absence of data from Japan. USDJPY traded at 147.753 at 15.41 UTC, bringing it to a total gain of 0.56% above Tuesday’s opening mark. USDJPY is riding the US inflation data wave, which saw it break a four-session losing streak on Tuesday.
Headline US inflation met expectations, coming in at 0.4% month-on-month in February. Meanwhile, Core CPI (excluding food and energy) beat the consensus forecast figure by 0.1%. This has created tailwinds for the dollar, as it aligns with the market consensus on a June 2024 interest cut. Meanwhile, the Bank of Japan has toned down its rhetoric regarding exiting of its long-running negative interest rates. Policymakers are impressed by the country’s economic gains in the last quarter, but remain cautious over low consumption. This could delay interest rate decision, or inform a gradual, as opposed to rushed exit of the NIRP.
The yen lacks a solid support to prevent further declines ahead of Thursday’s release of US jobs data and core retail sales figures for February. However, yields on US Treasuries have cooled in recent days, which could ease the downward pressure on the yen. Also, fundamentals around the dollar are generally weak, as indicated by the DXY index. The index hovers near monthly lows at 102.85 at the time of writing.
Technical analysis
USDJPY has its pivot at 147.50 and the market momentum currently tilts toward the buyers. That said, the trading pair will need to stay above this mark to safeguard its upside move. If the buyers retain control above that level, they are likely to break the resistance at 148.15, which would enable them to test 148.50 on extension. Conversely, if the sellers pull the action below the pivot, USDJPY could find support at 147.25. Extended control by the sellers will invalidate the bullish view and potentially test 147.05.
