- Core consumer inflation in Japan rose 2.3% in October.
- 56% of economists expect the Bank of Japan to raise rates in December.
- US jobless claims unexpectedly fell to 213,000.
The USD/JPI outlook shows a stronger yen amid increasing bets on a December rate hike by the Bank of Japan. However, the pair oscillated on Friday following mixed economic data from Japan. Meanwhile, the dollar remained strong after data in the previous session revealed a still-tight US labor market.
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Japan posted mixed reports on Friday, which initially boosted the yen before paring its gains. Core consumer inflation in the country rose by 2.3% in October, above forecasts of 2.2%. At the same time, services inflation increased by 1.5% after a previous reading of 1.3%. Increasing price pressures give the Bank of Japan plenty of room to raise interest rates. As a result, traders have increased the likelihood of a rate hike in December.
At the same time, a Reuters poll found that 56 percent of economists expect the Bank of Japan to raise rates in December. This is up from the previous month when only 49% expected such a move; therefore, the yen won.
However, a separate report found that manufacturing activity in Japan fell in November due to weak demand in China.
On the other hand, data from the US on Thursday revealed that jobless claims unexpectedly fell to 213,000, compared with forecasts of 220,000 claims. Several claims point to a low unemployment rate and a strong labor market, which is boosting the dollar. At the same time, a strong labor market reduces the likelihood of a Fed rate cut in December. Market participants are now awaiting US business activity data for more clues on whether policymakers will vote to cut rates in December.
USD/JPI Key Events Today
- US manufacturing PMI
- US flash services PMI
USD/JPI Technical Outlook: Bears encounter strong resistance at 154.51
From the technical side, USD/JPY price is trading below the 30-SMA with RSI below 50, supporting the bearish bias. However, the decline paused to consolidate near the key support level of 154.51.
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Price action is showing a lot of wicking as bears and bulls battle for control between the support and resistance levels of the 30-SMA. If the bears win, the price will make a lower low and target the next support at 151.74. On the other hand, if the bulls win, USD/JPI will break the SMA to retest the 156.51 resistance level.
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