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USD/JPY Reaction on Japanese CPI Data and BoJ Update
The USD/JPY rallied throughout the Asian session on Monday after reports of the Bank of Japan’s (BoJ) commitment to its dovish stance. The USD/JPY pair jumped above the 141.00 figure, despite inflation data in Japan coming in slightly better than expectations.
The Consumer Price Index (CPI) for June stood at a YoY 3.3%, above previous 3.2% reading, and estimates of 3.5%. Core CPI was 3.3%, matching projections and May’s number. The report, while beating estimates, nevertheless failed to clench any response from the BoJ, and weak JPY followed.
Reuters news reports on the BoJ’s stance added pressure to the JPY, and USD/JPY gained more than 150 pips to the upside. The USD/JPY pair seesawed around 140.00 throughout most of the Asian session before Reuters report surfaced.
The increase of the USD/JPY could continue based on the interest rate differentials. However, next week’s policy decisions from the US Federal Reserve (Fed) and the BoJ will be eyed, as sharp reactions could be seen in either direction.
Technically, the pair is set to remain upward biased, reclaiming during the session the Tenkan and Kijun-Sen levels, with traders setting their eyes on the 142.00 mark. On the other hand, if it drops below the Kijun-Sen, further downward movement is expected.
In conclusion, while the JPY weakness and the interest rate differentials could keep driving the USD/JPY higher, next week’s monetary decisions will decide the currency pairs’ fate.