Japanese Yen Slips on CPI Data but Bigger Storms Might be Brewing. Where to for USD/JPY?


Japanese Yen, USD/JPY, US Dollar, BoJ, YCC, CHF/JPY, Crude Oil, WTI – Talking Points

  • USD/JPY continues to tread water after inflation information
  • Mr Yen sees USD/JPY at 120 on the again of additional BoJ tightening
  • CHF/JPY and oil markets may be telling us one thing about USD/JPY

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The Japanese Yen is little flummoxed after at this time’s CPI numbers unveiled constructing worth pressures for the archipelago nation.

Headline CPI was the very best it’s been for 30-years at 3.8% year-on-year to the top of November. This was under the three.9% anticipated but above the earlier learn of three.7%.

Core inflation got here in at 3.7% year-on-year to the top of November which was in step with expectations and above the three.6% prior.

Former Vice Finance Minister Eisuke Sakakibara was interviewed on Bloomberg tv and mentioned that he might see USD/JPY going to 120. He is called Mr Yen due to the excessive regard of his stewardship by the Asian disaster of the late 1990’s.

Earlier this 12 months he mentioned that USD/JPY might go to 150. It traded simply shy of 152 in October, the very best stage since 1990. He thinks that the BoJ might elevate the cap on their yield curve management at their January assembly.

To recap, on Tuesday this week, the BoJ modified its yield curve management (YCC) program by concentrating on a band of +/- 0.50% round zero for Japanese Government Bonds (JGBs) out to 10 years.

They beforehand focused +/- 0.25% round zero and USD/JPY collapsed from 137.50 towards 130.50 on the lean.

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How to Trade USD/JPY

Further tightening of financial coverage by the BoJ might not be what some market contributors are anticipating, and an extra hawkish stance may come as a shock. This might see Yen recognize additional, doubtlessly validating Mr Yen’s prediction.

A stronger Yen might contribute in a constructive approach to the Japanese financial system. Imported inflation from a weaker Yen can be undesirable because it dampens already fragile demand. A rising Yen has the potential to unwind this impression.

Additionally, Japan depends closely on importing vitality and because the Yen climbs, this may alleviate family stability sheets to spend elsewhere within the financial system. Looking at WTI crude oil priced in Yen as a proxy for this dynamic, the reduction turns into obvious.

Elsewhere, CHF/JPY additionally seems to have doubtlessly rolled over after scaling to a 7-year peak in September. The Swiss Franc has some related traits to the Yen and if this cross charge continues to slide decrease, it might be saying one thing about the place buyers are in search of a funding currency.


Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the feedback part under or @DanMcCathyFX on Twitter

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