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Consumer Prices Will Drive Yen Price Action

David Becker
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Consumer Prices Will Drive Yen Price Action

Japan is scheduled to release its inflation reports on Friday. Tomorrow’s CPI reading, which will report both national and local number, will be the first official report since the sales tax increase. There have been some press accounts of Japanese businesses raising prices on top of passing through the tax increase.

Japan’s Corporate Service Price Index for March came in at +0.7% year over year, as expected. Stock markets in Asia were generally lower today, following Wall Street’s lead after unexpected weakness in U.S. home sales data on Wednesday, and the yen’s perkiness seemed to match the currency’s usual inverse correlation with equity market direction.

The NZD was the sole mover in the Asia trading session rallying against the yen and the greenback following a 25 basis point rate hike by the RBNZ to 3.0%. The tightening was expected, but still elicited kiwi buying. The statement that accompanied it was a bit more hawkish than many expected. NZDUSD logged a nine-day peak of 0.8636 against the greenback.

The USDJPY continues to consolidate and has remained in a 0.50 big figure range for the last 5 trading sessions. It seem that the BOJ is content with the current pace of the asset purchase program, but the inflation number will drive market action on Friday.

chart-consumer-prices-will-drive-yen-price-action.png

The relative strength index (RSI) reflects the current choppy trade and is printing near 50, which is right in the middle of the neutral range. Short-term support on the currency pair is seen near the 10-day moving average at 102.26. The bottom of the range near 101.20 is target support while the top end of the range near 104 is target resistance. Momentum is flat with the MACD (moving average convergence divergence) index printing near the zero index.

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