• Core consumer inflation in Tokyo, the capital of Japan, dropped in February.
  • Japan’s unemployment rate fell to a three-year low of 2.4% in January.
  • BOJ policymakers have emphasized the necessity of maintaining an ultra-loose monetary policy.

Today’s USD/JPY price analysis is bearish. The impact of government energy subsidies slowed core consumer inflation in Tokyo in February. However, an indicator that excludes the effects of fuel hit a new three-decade high as a sign of rising inflationary pressure.

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Separate data revealed Japan’s unemployment rate fell to a three-year low of 2.4% in January. It indicates that growing labor shortages will encourage employers to raise pay and lessen the pain that households are experiencing as a result of rising living costs.

The data raise questions about the Bank of Japan’s belief that the recent cost-driven inflation will only be temporary. Analysts say the central bank will continue to face pressure to gradually reduce its massive monetary stimulus.

According to official figures released on Friday, core consumer prices in Tokyo, a key predictor of national trends, increased by 3.3% from a year earlier in February. This was in line with expectations and fell from a nearly 42-year peak of 4.3% in January.

Market rumors are prevalent that under new BOJ Governor Kazuo Ueda, who takes over from outgoing Haruhiko Kuroda in April, the central bank will phase out or abandon YCC.

BOJ policymakers have emphasized maintaining an ultra-loose monetary policy until inflation is seen to meet their 2% objective with faster wage growth sustainably.

USD/JPY key events today

Investors will watch the US ISM non-manufacturing PMI, which is forecast to fall from 55.2 to 54.5. It will show the level of activity in the non-manufacturing sector.

USD/JPY technical price analysis: Buyers are weaker at the 137.02 key level

USD/JPY technical price analysis

The 4-hour chart shows USD/JPY in a bullish trend as the price respects the 30-SMA as support. The RSI has also respected the 50-level and has stayed above it. However, it also shows weakness in the bullish trend as it has made a bearish divergence.

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Bulls have paused at the 137.02 resistance, and bears are challenging the 30-SMA support. A break below the SMA will see bears take over with the next target at 135.00 support.

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Source: https://www.forexcrunch.com/usd-jpy-price-analysis-no-respite-for-jpy-amid-higher-inflation/