USD/JPY has reversed directions and posted gains on Friday, after three straight losing sessions. The yen is trading at 139.39, up 0.54% on the day. US markets are open for limited hours due to the Thanksgiving holiday, and there are no US releases on the schedule.

Tokyo inflation hits 40-year high

The caption above may sound dramatic, but inflation in Japan is far from the levels we’re seeing elsewhere, such as double-digits in the UK and the eurozone. Still, Japan finds itself dealing with rising inflation, after decades where deflation seemed a permanent part of the economic landscape. Tokyo Core CPI rose to 3.6% in November, nudging above the consensus of 3.5% and the consensus of 3.4%. This marked the highest reading since April 1982.

There’s no arguing that core inflation isn’t accelerating – Tokyo Core CPI has strengthened for six straight months and BOJ Core CPI for ninth consecutive months. This extended uptrend belies BOJ Governor Kuroda’s insistence that cost-push inflations is only temporary and that an ultra-accommodative policy is needed to ensure that inflation becomes sustainable. The BOJ is not showing any inclination to change policy and the recent improvement in the yen means one less headache, as the need for a currency intervention has diminished. It’s likely to be business as usual for the BOJ until the spring of 2023, with two key developments on the calendar – wage negotiations and a new governor for the central bank.

The Federal Reserve remains in a hawkish mode, sort of. The Fed’s stance, reiterated in this week’s minutes, remains somewhat mixed. On the one hand, the Fed has signalled that it will reduce the size of rate hikes “soon”, and the markets have priced in a ‘modest’ 50 bp hike in December after four consecutive 75-bp increases. At the same time, some Fed members are projecting that the terminal rate will be higher than previously expected. This mixed message has created uncertainty about what it means for the US dollar – will “lower for longer” raise risk sentiment and weigh on the dollar, or will investors view the Fed as remaining hawkish and stick with the US dollar? We’ll have to wait and see how the markets answer this question.

USD/JPY technical

  • USD/JPY faces resistance at 139.62 and 140.37.

  • There is support at 138.43 and 137.19.

Chart

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities.

Opinions are the authors — not necessarily OANDA’s, its officers or directors. OANDA’s Terms of Use and Privacy Policy apply. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Feed news Join Telegram

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD recovers above 1.0400, looks to post weekly gains

EUR/USD recovers above 1.0400, looks to post weekly gains

EUR/USD regained its traction after dropping toward 1.0350 in the early American session and climbed above 1.0400. Trading conditions remain thin on Black Friday and the pair remains on track to end the week in positive territory.

EUR/USD News

GBP/USD recovers toward 1.2100 as US Dollar loses strength

GBP/USD recovers toward 1.2100 as US Dollar loses strength

GBP/USD managed to stage a recovery toward 1.2100 in the American session on Friday and now looks to register gains for the third straight week. The US Dollar struggles to preserve its strength as markets remain subdued on Black Friday. 

GBPUSD News

Gold steadies near $1,750 as US yields retreat

Gold steadies near $1,750 as US yields retreat

Gold price continues to move sideways at around $1,750 heading into the weekend. The benchmark 10-year US Treasury bond yield retreated from the daily high it touched above 3.75% earlier in the day, allowing XAU/USD to erase a portion of its daily losses.

Gold News

Bitcoin: Assessing chances of one last bear market rally for 2022

Bitcoin: Assessing chances of one last bear market rally for 2022

Bitcoin price is in a good place to trigger another bear market rally from a high-time frame perspective. This development, combined with the optimistic outlook seen in on-chain metrics, further strengthens the possibility of a happy ending to 2022.

Read more

FX next week and yield curve inversions

FX next week and yield curve inversions

Since the Fed's last raise November 3, Fed Funds rate opens and closes at 3.83. The Fed Funds rate once traded freely on its own with highs and lows as any financial instrument. In 2000, Central banks implemented meetings every 6 weeks.

Read more

Majors

Cryptocurrencies

Signatures