USDJPY has been locked in a narrow range between 100.377 and 100.536 in the recent session as investors are awaiting for the Fed Chair Janet Yellen’s comments in the opening of central bankers’ summit which is scheduled today.
Fig. USDJPY H1 Technical Chart
A report released by the Statistics Japan on Friday (26/8) suggested that the national core consumer price index, which strips away the effect of volatile fresh food prices but includes that of oil products, fell 0.5% in July from a year earlier, the fifth straight month of declines. This marked the biggest annual drop in more than three years and also surpassed the analysts’ expectation of a 0.4% slump. The stumble of the index was brought about by the falling energy cost, including electricity and gasoline.
Furthermore, the report also implied that consumer prices in July rose 0.3% on a yearly basis, compared with a revised 0.5% increase in June. The factor seen weighing on prices is a lack of significant growth in wages, which led to weak household expenditure and lower CPI. Also, an excessively strong Japanese yen casted strong pressure on the import costs, which adversely affected the consumer price index.
The disappointing figures indicated that the recently Shinzo Abe’s stimulus program have failed to extricate the deflationary fears of consumers and retailers and to lift up inflation to the central bank’s 2% objective. More seriously, three years of Abenomics seemed not to operate well, with inflation remaining significantly lower than the target.
Accordingly, markets are looking forward to the central bank’s assessment next month of its stimulus program, which would hint the direction of monetary policy for the coming months. In an August survey of economists by the Japan Center for Economic Research, over half of 39 respondents forecast a dovish monetary policy from Bank of Japan in either September or October. Consequently, the yen slipped against other developed countries’ currency, including the greenback.
Tomorrow, the BOJ Governor – Mr. Kuroda – will have a speech by the end of the yearly symposium, which takes place in Jackson Hole. Some clues and statements on his next action into the markets are focused on.
On the other hand, traders received the good news from U.S market yesterday (25/8), which would augment the chances of an interest rate increase in coming months. The labor force once again confirmed its solidity with a lower-than-expected unemployment claims from the Labor Department. The number of U.S. workers who applied for unemployment insurance decreased by 1,000 to five-week low of 261,000 for the week ending on August 19th . Besides, according to the statistics from Census Bureau late Thursday (25/8), orders for goods except transportation rose by 1.5%, exceeding the consensus forecast of 0.4% advance. Durable goods orders rallied 4.4% in July, the highest reading since February 2015, which means U.S. companies are becoming more willing to invest. Since the business investment acts as the spine of a country’s future growth, an encouraging business investment number helped to reiterate U.S economy recovery. Although the flash services PMI for August remained above the level of 50, which suggested the industry expansion, the figure was lower than the July’s reading of 51.4.
Despite the pair of positive reports, the dollar index .DXY still plunged 0.08% to 94.64, compared with the opening price of 94.71 as the markets remain in the wait-and-see mode ahead of Fed Chair Janet Yellen’s opening remarks in the annual economic symposium which takes place from today.
Fig. DXY D1 Technical Chart
Fig.USDJPY H4 Technical Chart
Since falling down below to the psychologic important threshold of 100 in the middle of this month, USDJPY is on course to inch up slightly from the support of 99.527 and likely to be pierced from above by the MA 50 line. The currency pair is supposed to continue mounting up to the 23.6% of Fibonacci retracement on the back of a firm US dollar. Then, all striving may die down and the price will resume its down trend.
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