The CPI Inflation Rate in Japan Drives The USDJPY to Continue The Uptrend

Forex

Summary:

The recent surge in U.S. Treasury bond yields, fueled by strong economic data and hawkish Federal Reserve comments, has significantly impacted the USD/JPY pair, widening the gap between the two currencies. The Japanese yen faces downward pressure not only due to the rise in U.S. bond yields but also because of Japan's slower-than-expected core consumer price index increase, reducing speculation about a gradual exit from massive monetary stimulus. The article highlights the intricate relationship between fundamental factors, like economic indicators and central bank policies, and technical analysis in predicting and navigating the currency market

BUY USDJPY

Close Time

CLOSED

147.318

Entry Price

148.985

146.529

157.705 +0.446 +0.28%

75.4

Pips

Profit

146.529

148.072

Exit Price

147.318

Entry Price

148.985

Fundamental Analysis

The U.S. Treasury bond market has recently witnessed a notable shift, with yields on ten-year bonds rising by 0.65 percentage points, reaching a five-week high of 4.171%. This upward trajectory, observed over four consecutive sessions, is bolstered by robust economic data in the United States and more hawkish sentiments from Federal Reserve officials.

Key economic indicators, including higher-than-expected retail sales and a significant drop in weekly jobless claims, underscore the resilience and strength of the U.S. economy. Federal Reserve Board member Christopher Waller's remarks about the flexibility of monetary policymakers in navigating interest rate adjustments further contribute to the positive sentiment.

The impact of these developments is felt globally, particularly in the currency markets. The rise in U.S. bond yields has exerted downward pressure on the Japanese yen against the U.S. dollar, creating a widening gap between long-term bond yields in Japan and the United States. The situation is compounded by data from Tokyo revealing a slower-than-expected 2.3% increase in Japan's core consumer price index for December, the smallest rise in almost a year and a half.

Rodrigo Catril, Chief Forex Strategist at National Australia Bank, emphasizes the substantial influence of U.S. Treasury bond yields on the Japanese yen. Catril notes that the yen is also weighed down by expectations that the Bank of Japan will maintain its current stance until at least April, and potentially until mid-year.

Jeen Folley, an expert strategist at Rabobank, points out that the market's realization of the challenges facing the Bank of Japan in raising interest rates and the simultaneous reassessment of risks regarding a Federal Reserve interest rate cut is reflected in the strengthening of the U.S. dollar against the yen. The CPI Inflation Rate in Japan Drives The USDJPY to Continue The Uptrend_1

The CPI Inflation Rate in Japan Drives The USDJPY to Continue The Uptrend_1

Japan National CPI YoY (Excl. Food&Energy)

Technical Analysis

Amidst this fundamental backdrop, technical analysis in the forex market offers additional insights. Examining a 1-hour chart, the current price sits at 148.262. Analysts anticipate a retracement to the previous demand zone at 147.000, formerly an old supply zone. From there, the expectation is for the price to resume upward momentum, pushing towards the historical supply zone at 149.000. The alignment of these technical factors is further emphasized by a 20-period moving average pointing upwards. The CPI Inflation Rate in Japan Drives The USDJPY to Continue The Uptrend_2

The CPI Inflation Rate in Japan Drives The USDJPY to Continue The Uptrend_2

USDJPY Price Chart

Trading Recommendation

Trading Direction: long

Entry Price: 147.318

Target Price: 148.985

Stop Loss: 146.529

Risk Warnings and Disclaimers

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Warren Takunda

Traders' Opinions

Economic

Summary:

The Japanese yen faces instability with a 4.98% decline in January, erasing December gains. Trading at 148.04 against the US dollar, speculation on breaching 150 prompts concerns of currency intervention. The Bank of Japan's potential policy tightening adds uncertainty, with focus on Friday's Japan’s Core CPI release (estimated at 2.3%).

BUY USDJPY

Close Time

CLOSED

148.194

Entry Price

149.750

146.900

157.705 +0.446 +0.28%

129.4

Pips

Loss

146.900

146.892

Exit Price

148.194

Entry Price

149.750

In the wake of a relentless January, the Japanese yen finds itself grappling with heightened volatility, marked by a 4.98% decline since the beginning of the year, erasing the hard-fought gains seen in December. At the time of writing, USD/JPY is trading at 148.04, experiencing a modest 0.08% dip in the North American session.

Is Yen Headed Back to 150?

The yen's current position, hovering near 148.04, raises questions about its potential trajectory, with market analysts pondering whether it is headed back to the critical 150 level. A breach of this threshold could trigger warnings of currency intervention from Japan’s Ministry of Finance (MoF), which has a history of backing its rhetoric with action, as witnessed in September 2022.

BoJ's Tightening Speculation and Inflation Concerns

Speculation regarding the Bank of Japan (BoJ) tightening its policy and lifting rates out of negative territory is amplifying market uncertainties. Despite inflation indicators consistently exceeding the 2% target for over a year, Governor Ueda remains cautious. Ueda argues that sustainable inflation requires evidence of higher wage growth, dismissing the current inflation as driven by cost-push factors.

Investors are keenly awaiting Friday's release of Japan’s Core CPI, with the market estimate anticipating a dip to 2.3%. The BoJ's response to this inflation data is expected to shape future market dynamics and may provide insights into the central bank's stance on policy tightening.

In contrast to Japan's economic challenges, the US labor market continues to demonstrate resilience. Unemployment claims in the United States fell to 187,000, reaching the lowest point since September 2022 and surpassing market estimates. This positive trend in the labor market is contributing to the strength of the US dollar.

Technical Analysis

From a technical perspective, USD/JPY is currently approaching a pullback support, presenting a potential opportunity for a rebound. A buy entry point is identified at 147.700, aligned with the pullback support, while a stop-loss level is set at 146.900, just below the same support level. The take-profit range is situated between 149.400 and 149.749, coinciding with a pullback resistance that closely aligns with the 78.6% Fibonacci retracement level.

TRADE RECOMMENDATION

BUY USDJPY

ENTRY PRICE : 147.700

STOP LOSS : 146.900

TAKE PROFIT : 149.750

Risk Warnings and Disclaimers

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Peterson

Commodity

Summary:

Today's oscillating range is expected to be 72.0-75.0, and it is better to buy low and sell high.

SELL WTI

EXP

EXPIRED

75.000

Entry Price

72.000

75.500

73.290 -0.299 -0.41%

Pips

EXPIRED

72.000

73.146

Exit Price

75.000

Entry Price

75.500

Fundamentals

During Wednesday's (January 19th) Asian session, WTI crude oil oscillated slightly, and it is currently trading at 73.8 dollars/bbl.

Yesterday, WTI continued to go strong, surging from 72 to 74.2 because of last night's announcement of the EIA inventory, which again substantially decreased. It was a big surprise because the API was still in the process of increasing stocks. Another positive factor came from the Middle East, where the conflict between Iran and Pakistan is developing. Yesterday the oil price looked strong, but it still fluctuated in the 70-74.5 range. Meanwhile, the constraint is still the lack of demand. Although the announced crude oil inventories declined unexpectedly, gasoline inventories continued to grow sharply. Overall, the oil market has no clear direction in the short term, low crude oil inventories and geopolitical conflicts can support oil prices, but the demand slump is also a great limiting factor. Although geopolitical risks emerge frequently, they disappear quickly as well, which is also a factor that causes big fluctuations.

In trading, if you already have a validated system, you should follow the system's signals. No matter what the result is. The loss is also part of it. That's the cost of the system. Thus, we don't need to pay too much attention to that, and don't need to avoid it, but should progress with the next trade.

Inventory: EIA data showed that crude oil production increased by 100,000 barrels per day to 13.3 million barrels per day, commercial crude oil inventories dropped by 2.492 million barrels, and strategic crude oil inventories rose by 596,000 barrels. In addition, EIA gasoline inventories rose by 3.083 million barrels, refined oil inventories increased by 2.37 million barrels, and heating oil inventories grew by 542,000 barrels.

Geopolitical issues: The conflict in the Middle East continues to develop. Iran and Pakistan "attacked" each other's territory targets. In the early morning of January 19th local time, Yemen's Houthi military spokesman Yahya Sarea claimed that the Houthis attacked a U.S. cargo ship with anti-ship missiles and hit the target. On January 18th local time, John Kirby, coordinator of strategic communications at the National Security Council of the U.S. White House, said at a briefing that early in the day the United States launched a new round of strikes against Yemen's Houthis and destroyed a series of missiles that the Houthis were preparing to launch.

Today's focus: U.S. existing home sales in December, the U.S. Michigan Consumer Sentiment, and U.S. one-year ahead inflation expectations in January.

Technical Analysis

WTI ascended yesterday. After reaching the support area between 72 to 72.5, WTI appreciated once to 74.2, entering the resistance area from 74 to 74.5. Then, it failed to rise further and closed the daily chart with a bull candle. At present, the oscillating center of WTI is lifting, and WTI is running in an ascending channel. Nevertheless, the oscillating pattern will not change because of complex fundamentals, especially geopolitical factors. Thus, it is better to buy low and sell high and protect the profits.

Technically, regarding the 1H chart, the bullish momentum has been released sufficiently after two days. Furthermore, MACD forms a death cross, and a bearish piercing pattern appears at highs. Therefore, investors should be careful of a possible retracement today. The support below will stay in a range from 72 to 72.5. Regarding the 4H chart, the MACD forms a golden cross which is expanding. But now, the Bollinger upper band is near 75, and we should focus on the resistance. It is recommended to go short at highs instead of chasing the trend. Also, we can try to go long after a retracement. In the daily chart, MACD forms a golden cross, and WTI is moving near the middle line (at 74) of the channel as shown below. If WTI surges further, investors should focus on the resistance from 76 to 77. Today, investors should buy low and sell high in the range of 72.0 to 75.0.

Oil Extends Strength After Unexpected De-stocking_1

Trading Recommendations

Trading direction: Short

Entry price: 75.000

Target price: 72.000

Stop loss: 75.500

Support: 72.500/70.000

Resistance: 74.200/75.200

Risk Warnings and Disclaimers

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Peterson

Commodity

Summary:

Today's oscillation will start from $2013 to $2042, and it is better to buy low and sell high.

BUY XAUUSD

EXP

EXPIRED

2013.00

Entry Price

2042.00

2009.00

2640.86 +1.23 +0.05%

Pips

EXPIRED

2009.00

2029.67

Exit Price

2013.00

Entry Price

2042.00

Fundamentals

During Friday's (January 19th) Asian session, spot gold oscillated slightly, and it is now trading at $2023.

Yesterday, gold rebounded as expected and recovered the previous loss, closing the daily chart higher. However, the data was bearish for gold yesterday. The U.S. initial jobless claims were reduced to the lowest level since the end of 2022, and interest rate cut expectations decreased. But the rebound in gold price was supported by bears taking profits and the risk-aversion buying regarding the situation in the Middle East. The U.S. data and Fed officials speeches dampened optimistic interest rate cut expectations, as we previously emphasized that the market was overly optimistic. It is not possible to start interest rate cuts in March. After all, there are elections at the end of this year. If inflation doesn't match expectations, it will affect the performance of the government. Although there may be revisions, it is less likely to turn from rate cuts to rate hikes. The main theme is interest rate cuts this year, and the only uncertainty is the time and magnitude. As time passes, the bets on interest rate cuts will increase. The retracement in gold prices has reached more than 80 U.S. dollars which is sufficient, so a rebound can be expected soon.

Yesterday, gold finally won a rebound after being oversold. Today, there is no signal to enter the market. We should wait and see. But the long positions entered at $2010 on the previous two days can still be held. Many investors are impetuous, and they amplify the fluctuations. When there is little retracement, some investors want to take profits to stay safe. This is the problem of the trading attitude. When you look at the sea from the coast, the waves will always be substantial. But if you look at the sea from the airplane, it is calm. To overcome the excitement or fear when facing intraday fluctuations, the best way is to turn off your computer after setting target points.

News: Minutes of the ECB December meeting showed that high interest rates will stay for some time, and fears of a "hard landing" have eased.

Geopolitical: Houthis said they will continue to attack Israel and ships bound for Israel to support the Palestinian people who are in a humanitarian crisis due to the Israeli invasion. The U.S. put Yemen's Houthis back on the list of terrorist organizations.

Data: The latest U.S. initial jobless claims recorded 187,000, compared to an expectation of 207,000, while the previous reading was 203,000. It is a new low since September 2022.

Today's focus: U.S. existing home sales in December, the U.S. Michigan Consumer Sentiment, and U.S. January one-year ahead inflation expectation.

Technical Analysis

Yesterday, the U.S. employment data exceeded expectations again. Nevertheless, the USDX fell from highs and the U.S. stocks surged. After depreciating for two days, gold also rebounded and closed higher. Gold currently stopped declining below $2020, and the trend is not strong at the moment, mostly because the gold bears tried to close a position previously. Then, gold may oscillate to build a firm bottom before a greater rebound.

A bull candle covered two consecutive bear candles, and gold prices stayed above the lower area of the ascending channel. In addition, a bullish piercing pattern emerged, and gold will oscillate upward today. Now, the initial support is in the range from $2015 to $2020, and further support will be at $2000. Nonetheless, the initial resistance should be between the 5-day SMA and the 10-day SMA ($2028 to $2030), and further resistance stays between $2042 and $2045. After the retracement this week, the MACD indicators returned to the 0-axis, and the overbought conditions as well as the bearish divergence are fading from restricting gold prices. Today, the trading range should start from $2013 to $2042, where aggressive investors could buy low and sell high in the range. Gold Rebounded Due to Risk-Aversion Sentiment_1

Gold Rebounded Due to Risk-Aversion Sentiment_1

Trading Recommendations

Trading Direction: Long

Entry Price: 2013

Target Price: 2042

Stop Loss: 2009

Support: 2020.000/2010.000

Resistance: 2030.000/2042.000

Risk Warnings and Disclaimers

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Warren Takunda

Central Bank

Traders' Opinions

Summary:

Surprising UK inflation data, with a slight rise in CPI, introduces uncertainty for investors. Eurozone inflation remains stable, positioning the ECB for a potential rate cut. Technical analysis suggests a selling opportunity in EUR/GBP after breaking the 0.85800 support, targeting 0.85500. Divergence in central bank policies adds complexity, prompting traders to consider short positions.

SELL EURGBP

Close Time

CLOSED

0.85707

Entry Price

0.85000

0.86100

0.82950 -0.00022 -0.03%

6.7

Pips

Profit

0.85000

0.85640

Exit Price

0.85707

Entry Price

0.86100

UK inflation data surprised markets by surpassing expectations, causing a slight rise in the headline Consumer Price Index (CPI) to 4%, contrary to predictions of a decrease to 3.8%. Core inflation also remained resilient at 5.1% instead of the anticipated 4.9%. While not a significant setback, the deviation from projections underscores the market's sensitivity to data as investors brace for potential turbulence in the first quarter of 2024.

On the Eurozone front, final inflation figures for December remained unchanged, reinforcing the European Central Bank's (ECB) commitment to achieving price stability. Despite a recent uptick in headline inflation from 2.4% to 2.9%, expectations are for a subsequent decline in the coming months. The data positions the ECB for a potential rate cut in Q1, raising questions about the sustainability of such a move given the economic challenges faced by the Eurozone.

Technical Analysis

The EUR/GBP pair experienced a breakdown below the critical support level at 0.85800 following the release of the UK inflation data. The current focus lies on a potential retest of this level, presenting an opportunity for selling positions. Market analysts are closely monitoring the 0.85800 zone for a selling entry point, with an eye on shorting the pair and targeting the next support level at 0.85500.

TRADE RECOMMENDATION

SELL EURGBP

ENTRY PRICE : 0.85800

STOP LOSS : 0.86100

TAEK PROFIT : 0.85500

Risk Warnings and Disclaimers

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Peterson

Commodity

Summary:

Intraday range or 1998-2028, sell high and suck low.

BUY XAUUSD

EXP

EXPIRED

1998.00

Entry Price

2028.00

1993.00

2640.86 +1.23 +0.05%

Pips

EXPIRED

1993.00

2023.94

Exit Price

1998.00

Entry Price

2028.00

Fundamentals

Spot gold moved slightly upward during the Asian session on Thursday (January 18), and it is currently trading near $2009.

Yesterday, gold prices tumbled again, falling as low as $2001, mainly due to that the December U.S. retail sales data exceeded expectations and the European Central Bank released another hawkish signal. The ECB President Lagarde said the central bank may cut interest rates in the summer, but aggressive bets on rate cuts don't help fight against inflation. It seems that policymakers have reached this consensus. Yesterday, the U.S. dollar index and U.S. bond yields continued to rise sharply, with the dollar index hitting a one-month high. The two days of decline in gold prices were the result of expectation revisions. In the past three months, gold traders fully priced a rate cut in March. But this expectation seems unlikely to be realized, so gold prices are expected to retrace. However, given that rate cuts are still the main tone in 2024, coupled with geopolitical risks, gold prices will be supported. Therefore, we cannot keep bearish on gold after a sharp retracement. And now the gold price has retraced below $2010. That's what we want, so now we can try to enter long positions for long-term trading.

As gold was oversold yesterday, our position was closed with a small loss. Investorswho entered long positions below$2010 can continue to hold them. If the price continues to fall, we can keep buying gold. It should be noted that we should enter small positionswhen buying gold, with large stop lossto leave enough space for fluctuations.

Official's attitude: European Central Bank President Lagarde said the ECB may cut interest rates in the summer, but aggressive bets on interest rate cuts will not help fight inflation.

Data: U.S. retail sales accelerated more than expected in December, rising 0.6% from a month earlier, the biggest increase in three months.

Today's focus: U.S. initial jobless claims, annualhousing starts and the Philadelphia Fed manufacturing index.

TradingAnalysis

Yesterday's U.S. retail data greatly exceeded expectations, which is the reason for the plummetin gold prices. As gold prices have plunged for two days in a row,gold bulls may have suffered huge losses.But bearish sentiment has been fully released, so gold may have been oversold recently.Tonight's employment data is crucial. If it's notbearish for gold, the price may rebound in the near future.

Following the plunge on Tuesday, gold prices continued to fall yesterday, leaving no opportunity for bulls.The price dropped below key support levels of $2020 and $2010, and even the 2000 mark was almost lost. It has entered the oversold region in the hourly timeframe, and there may be an intraday rebound.In the daily chart, the price is swinging near the lower edge of the fluctuation box, with very strong support, so it may bottom out and rally in the near term. Today's reference trading range is 1998-2028, and aggressive traders can buy low and sell high in this range. Gold Tumbles as U.S. Retail Sales Beat Expectations_1

Gold Tumbles as U.S. Retail Sales Beat Expectations_1

Trading Recommendations

Trading direction: Long

Entry price: 1998

Target price: 2028

Stop loss: 1993

Support: 2000.000, 1988.000

Resistance: 2020.000, 2035.000

Risk Warnings and Disclaimers

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Jason

Summary:

Uncertainty over the economic outlook, signs of a slowdown in the labor market, and slightly rising price pressures have revived expectations for a rate cut that had previously been dampened by retail sales data.

SELL USDX

Close Time

CLOSED

103.500

Entry Price

102.750

104.000

108.690 -0.030 -0.03%

6.9

Pips

Profit

102.750

103.431

Exit Price

103.500

Entry Price

104.000

Fundamentals

U.S. retail sales data for December, released yesterday, rose 0.6% from a month earlier, double the previous reading of 0.3% and exceeding the expected 0.4%. It was the largest increase in three months. Core retail sales also increased by 0.4% from a month earlier, also twice the previous and expected data. Other sub-item data also showed growth in almost all possible dimensions and all headline indicators in the area of consumer spending. This could indicate that the economy is still strong, and also imply that core inflationary pressures will persist for longer.

This certainly dampens the expectations for a rate cut. After the release of the data, the FedWatch tool showed that the market expected a 53.2% probability of the Federal Reserve first cutting rates in March, down from Tuesday's 65.1%.

Thanks to this, the U.S. dollar index hit a 1-month high of 103.692 during the trading session, but it fell from highs late in the U.S. session, retracting all the gains. This indicates that the rate-cut expectations are strong.

In addition, the Fed's Beige Book was also released yesterday, which showed little change in economic activity over the past few weeks (since the prior Beige Book period). manufacturing activity declined in almost all districts. Overall, the report concluded that weak overall demand, a subdued commercial real estate market, and the U.S. presidential election will create uncertainty for economic growth.

Overall employment levels changed little. Nearly all districts cited signs of cooling in the labor market. Prices rose slightly in six of the seven districts.

In short, uncertainty about the economic outlook, signs of a slowdown in the labor market, and rising price pressures have revived expectations for a rate cut, which had previously been dampened by the retail sales data.

Technical Analysis

In the 4-hour timeframe, there is a Dark Cloud Cover pattern. The U.S. dollar index is expected to test the key support level of 102.75, which is both the top of the previous oscillation range and the 0.618 Fibonacci retracement level. The key resistance is at the 0.328 Fibonacci retracement level (103.959). Only by breaking through this level can the USDX start a new uptrend.

The ADX line of the DMI indicator has fallen back, showing a weaker upward momentum; there are signs that +DI will cross over -DI, and the -DI line (in blue) is moving upward, from 7.8 to 15.0, showing a strong downward momentum at the moment. In the Ichimoku Cloud, the baseline (in blue) and the turning line (in red) have been greatly separated, and the price has fallen below the turning line and is moving toward the baseline. This also shows strong downside momentum.

Overall, if the USDX retraces, we can go short after the retracement.

USDX Drops on Strong Rate-Cut Expectations_1

Trading Recommendations

Trading direction: Short

Entry price: 103.5

Target price: 102.75

Stop loss: 104.0

Support: 103.048, 102.75

Resistance: 103.35, 103.636, 103.959

Risk Warnings and Disclaimers

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The CPI Inflation Rate in Japan Drives The USDJPY to Continue The Uptrend

Fundamental Analysis

Japan National CPI YoY (Excl. Food&Energy)

Technical Analysis

USDJPY Price Chart

Trading Recommendation

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Oil Extends Strength After Unexpected De-stocking

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Gold Rebounded Due to Risk-Aversion Sentiment

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EUR/GBP Breaks Support at 0.85800 as ECB Signals Rate Cut

Gold Tumbles as U.S. Retail Sales Beat Expectations

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USDX Drops on Strong Rate-Cut Expectations

Fundamentals

Technical Analysis

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Risk Disclosure