- Japan’s CPI rose by 3.0% in December.
- The Bank of Japan hiked rates by 25-bps on Friday morning, boosting the yen.
- Data revealed a slight increase in US jobless claims last week.
The USD/JPY price analysis shows a bullish day for the yen after upbeat inflation data and a rate hike from the Bank of Japan. Meanwhile, the greenback remained fragile after Trump softened his tone on tariffs and said the Fed should continue cutting interest rates.
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Data on Friday revealed that Japan’s CPI rose by 3.0% in December. This creates the right conditions for the Bank of Japan to raise interest rates. Notably, the central bank hiked rates by 25-bps on Friday morning, boosting the yen. This was a big milestone for a country that has maintained ultra-low rates for a long time. However, policymakers noted that underlying inflation had only risen moderately.
On the other hand, the dollar remained fragile a day after Trump’s speech. The president said little about tariffs, leading most to believe he had softened his approach. Additionally, Trump called on the US Central Bank to continue cutting interest rates, which is bearish for the dollar.
At first, analysts had expected the new president to come in guns blazing and ready to implement trade tariffs. However, he hinted at forgoing the 10% tariff on China on Thursday. Instead, the two countries could negotiate better terms of trading. Elsewhere, data revealed a slight increase in US jobless claims last week, showing some cracks in the labor market.
USD/JPY key events today
- US flash manufacturing PMI
- US flash services PMI
USD/JPY technical price analysis: Bears aim for new low below 155.01
On the technical side, the USD/JPY price has broken below the 30-SMA with a solid candle, indicating a bearish shift in sentiment. Initially, the price had gone from bearish to bullish, breaking above the SMA.
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However, this move paused at the 0.5 Fib retracement level, where bears reemerged. The decline is currently approaching the 155.01 support level. A break below this level will allow USD/JPY to revisit the 153.00 key psychological level. At the same time, it will signal a continuation of the downtrend by making a lower low.
On the other hand, if the price fails to break below 155.01, it might reverse to start a new bullish trend by breaking above the 157.01 resistance level.
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