Japan’s rising inflationary pressures appear to be increasing, although at a lower rate than the US and UK, as rising food and gas prices have reduced consumer spending. In November, household spending stood at -1.3%. The consensus for the December report, due for release on Tuesday, stands at a flat 0.0%. Kuroda said last week that nominal wages have not increased much, and it is difficult to see inflation sustainably hit the BOJ’s 2% target unless wages rise in tandem with prices. He added that it was critical to maintain strong monetary easing to support the economy and help generate steady wage and price growth.
The Japanese currency benefited from falling stock markets, faltering risk appetite among investors and a weaker US Dollar during the opening month of the year, but weakened against all of the major G10 peers during the week to Friday.
USDJPY was up +0.22%, moving higher on Friday on reduced safe-haven demand for the Yen, after Japan’s Nikkei Stock Index closed up +0.36%. Also, a spike in the 10-year T-note yield to a 2-year high last week weakened the Yen.
USDJPY, H4 –
The pair extended its consolidation pattern from 116.34 last week, and therefore the outlook has not changed and the initial bias remains neutral at the start of the week. On the upside, a break of 115.687 would extend the rebound of 113.46 to retest the high at 116.34. Meanwhile, on the downside, a break of 114.14 would extend the consolidation with another decline through the support at 113.46.
An additional signal in favor of the pair’s growth would be a test of the ascending trend line on the Relative Strength Index. The second signal would be a rebound from the lower border of the ascending channel, as well as from the lower border of the Triangle. Cancellation of growth options, will be a decline and a break of the 112.52 area will confirm the continuation of the pair’s decline to the 110.81 and 109.11 areas. USDJPY growth would be confirmed by a break of the resistance area and a close above the 116.34 level.
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Ady Phangestu
Market Analyst
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