Japanese Inflation Tops Forecasts
The Japanese Yen is seeing better demand across early European trading on Tuesday. Overnight, the latest Japanese inflation data has once again turned for onto potential BOJ policy normalisation. National Core CPI was seen coming in at 2% last month, above the 1.9% the market was looking for. The data increases the likelihood that upcoming labour-management wage talks will result in sizeable raise being offered out. If seen, this would put greater pressure on the BOJ to normalise monetary policy with traders currently anticipating a potential rates shift in March or April.
Wage Growth in Focus
Expectations of a fresh spike higher in inflation, linked to base effects from last year’s energy subsidies kicking in, are also bolstering the view that a shift is coming at the BOJ. However, there are still plenty of downside risks. On the back of two consecutive quarters of falling GDP growth and with private consumption still very weak, the BOJ needs to see that wage hikes are outstripping inflation enough to foster stronger purchasing power in Japanese households. If the bank gets the sense this is the case, then April could well be the lift off point for rates, raising risks of a sharp reversal in JPY.
Technical Views
USDJPY
The rally in USDJPY has stalled for now ahead of a test of the 151.81 level resistance and a retest o the broken bull trend line. With momentum studies weakening, risks of a deeper correction are growing. Bulls will need to defend 148.98 to the keep the focus on a continuation higher or risk a test of 145 next. Notably, we have a buy signal in the Signal Centre today set below market at 149.88.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.