Bullish Reversal in USD/JPY Points to 160 As Japan Inflation

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MARKETS TREND

The market trend factors in multiple indicators, including Simple Moving Average, Exponential Moving Average, Pivot Point, Bollinger Bands, Relative Strength Index, and Stochastic.

Yesterday USD/JPY dived 2.5 cents top to bottom, but it made a strong bullish reversal and returned above 150, which suggests further gains as the pair heads toward the 160 level.

The USD/JPY pair appears to have broken free from its bearish trend following a sharp summer decline that saw its value dip below the 140 mark. Buyers have since regained dominance, driving the pair steadily higher toward the 160 threshold. In late November, the pair experienced a significant pullback, dropping 7 cents and briefly falling below the critical 150 level. This came after an impressive two-month rally in which the USD/JPY surged nearly 17 cents.

However, December brought renewed buying interest as the decline stabilized near key moving averages, providing a solid base for recovery. So far this month, the pair has regained about 9 cents, signaling renewed bullish momentum. The market experienced a brief pause after the FOMC meeting, as traders turned their attention to potential moves from the Bank of Japan. With the BOJ’s 25-basis-point rate hike now behind us, the market appears to have shrugged off earlier concerns.

USD/JPY Chart Daily – The 100 SMA Held As Support

Yesterday, the USD/JPY dipped to 153.70, finding support at the 100-day SMA (green) before buyers stepped in again. This resurgence in buying pressure pushed the pair above the 155 level. Early this morning, the Core CPI inflation data from the Bank of Japan added fresh context to the currency pair’s movements. With inflationary pressures remaining in focus, traders are closely monitoring whether the BOJ’s policies will further influence the yen. The technical and fundamental backdrop suggests that bullish momentum could continue, as key support levels remain intact and confidence in the broader economic environment grows.

• Bank of Japan Core CPI y/y (December):

  • Reported at 1.9%, slightly above the expected 1.7%.
  • Indicates a modest acceleration in core inflation compared to November’s figure of 1.7%.

• November Core CPI Recap:

  • The core CPI had remained steady at 1.7%, showing consistent, though measured, inflationary pressures within the Japanese economy.

• Japan Services PPI (December):

  • Reported at 2.9% y/y, falling short of the expected 3.2% and showing a slight decline from November’s 3%.
  • The slowdown in services PPI growth could reflect easing price pressures in the service sector, potentially influenced by subdued demand or stabilizing costs.
• Market Implications:
  • The higher-than-expected core CPI reinforces the view that inflationary pressures in Japan remain persistent, which could influence BOJ policy decisions moving forward.
  • The softer Services PPI may provide a counterbalance, suggesting that broader inflationary trends are not yet out of control.
• Investor Focus:
  • Traders will monitor upcoming BOJ statements closely to gauge how policymakers interpret this mixed data.
  • Continued inflation momentum might pressure the BOJ to adjust its ultra-loose monetary policy, while a slowdown in service price growth could support maintaining a cautious approach.

USD/JPY Live Chart

USD/JPY

Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst.
Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank’s local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

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