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  • Tokyo’s inflation has increased at the fastest rate since 2014.
  • Markets expect Japan’s inflation to rise by 3% in the coming months.
  • BoJ policymakers are warning of higher inflation, challenging Kuroda’s dovish stance.

Today’s USD/JPY price analysis is slightly bearish. For the fourth consecutive month, core consumer prices in the capital of Japan, which serves as a leading indicator of inflation nationwide, increased 2.8% from a year earlier. This is the highest increase since 2014.

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The data may raise questions about the Bank of Japan’s belief that recent cost-push price increases will only be temporary. It confirmed market expectations that nationwide core consumer inflation will approach 3% in the coming months.

“The data showed price rises were broadening. We’ll likely see core consumer inflation exceed 3% in October,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

Although inflation has recently increased, BOJ Governor Haruhiko Kuroda has vowed to maintain an ultra-loose monetary policy since, in his opinion, transient causes rather than strong consumption are to blame.

However, indications of further price increases led some BOJ members to issue a warning this month that inflation may exceed expectations, highlighting Kuroda’s difficulty in defending extremely low-interest rates.

Although the BOJ intends to maintain ultra-low interest rates, the rate of its money printing is slowing, indicating that the institution is discreetly winding down Kuroda’s radical stimulus program. This might favor the yen in the future.

USD/JPY key events today

Investors will see the number of job vacancies in the US when the JOLTs job openings report is released later today. There will also be a service purchasing managers index report from Japan.

USD/JPY technical price analysis: Range-bound price action keeping prices below 145.00

USD/JPY price analysis

Looking at the 4-hour chart, we see the price trading at the 30-SMA and the RSI close to 50. The price is stuck in a tight range, with resistance at 145.00 and support at 144.00. This tight consolidation also trades within a bigger range with the same resistance and support at 142.00. Bulls have really tried to break above 145.00 but have failed. This level has become a solid resistance level.

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The price is currently facing 145.00 resistance. A break above would see the resumption of the bullish trend. However, if the resistance holds strong, the price will likely break below 144.00 and head for support at 142.00.

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