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Japanese Yen Looks Past CPI for Sentiment, USD/JPY Rise Stalling?

Japanese Yen Looks Past CPI for Sentiment, USD/JPY Rise Stalling?

Daniel Dubrovsky, Contributing Senior Strategist


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Japanese Yen Talking Points:

  • Japanese Yen looks past mostly in-line local inflation data for risk trends
  • CPI remains below BoJ’s sustainable price target after outlook downgrade
  • USD/JPY’s rise since May appears to be stalling on 2017 falling resistance

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After the Japanese Yen rose cautiously on Thursday as sentiment deteriorated, the currency looked to a local inflation report to start Friday’s session. In May, Japan’s National CPI clocked in at 0.7% y/y which is more than the 0.6% estimated result. The rest of the results were in line with expectations. National CPI excluding fresh food was 0.7% y/y. Cutting out energy as well has inflation running at 0.3% y/y.

The mostly in-line CPI data was not much of a surprise and the Yen barely budged on the outcome. For the time being, Japan inflation is still persistently below the BoJ’s target. In fact, the central bank downgraded their assessment on CPI last week at their rate announcement. With the central bank still looking for sustainable 2 percent inflation, it will probably take a significant beat in CPI to nudge the Yen.

With that in mind, the focus for the Japanese has and seems likely to be risk trends for the time being. During the beginning of this week, the Yen rose aggressively as expected when rising trade war fears deteriorated sentiment. Following losses on Wall Street, Japanese shares opened lower at the beginning of Friday. More declines ahead can open the door to further Yen gains.

USD/JPY 5-Minute Chart: Japan CPI and Tokyo Open Reaction

USD/JPY 5 Minute Chart

USD/JPY Technical Analysis: Stalling at Resistance?

On a daily chart, the rise in USD/JPY since late-May appears to have stalled after failing to push above a descending resistance line from December 20. A break below near-term support, which is the 23.6% Fibonacci extension at 109.71, opens the door to more losses ahead. With that in mind, the next target after could be the 14.6% minor level at 109.10. A push above resistance has the May 21 high at 111.39 as the next target.


USD/JPY Trading Resources:

--- Written by Daniel Dubrovsky, Junior Currency Analyst for

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.