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Japan posts positive inflation

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Japan posts positive inflation

The Yen gained traction on Friday, despite notching up a positive inflation reading that generated cheers from the Abe government.  Earlier in the week the Euro saw inflows in the heels of a better than expected Zew survey.  Europe’s economic situation seems to be turning and next week’s employment and inflation data will go a long way toward showing market participants were the Eurozone stands

The consumer price index in Japan came in at 0.2% year over year from -0.3% in May, and was the largest gain since 2008. The BOJ has been targeting inflation as its gauge for monetary policy and the positive print shows that the asset purchase program has been somewhat successful.  Most of the increase came in food and energy.  The core reading of inflation, which excludes food and energy printed at -0.2% year over year.  Even though the results of the core and headline CPI readings were higher than consensus expectations, the Euro moved lower against the Japanese currency.

The EURJPY currency pair moved through support near the 10-day moving average testing the upward sloping trend line that attached the lows in June and July that came in near 130.80.  A close below this support level would likely test the lows made in early July near 127.50.

Momentum on the currency pair is turning with the MACD (moving average convergence divergence) index generating a sell signal.  This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread.  The index is also moving from positive to negative territory confirming the sell signal.  The RSI (relative strength index) which is an oscillator that measures overbought and oversold levels is printing near 52, which is in the middle of then neutral range.

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