Forex Trading

USD/JPY Analysis Today – 12/03: CPI Data Awaited (Chart)


Yen Strengthens as Markets Anticipate US Inflation Data. Recent Japanese GDP growth adds pressure, with USD/JPY near 147.00, awaiting key US figures.

  • According to recent trading, the Japanese yen has strengthened against the US dollar, thanks to some recent data and news.
  • The recent sell-off in USD/JPY hit a five-week low of 146.48 before stabilizing around 147.00 at the time of writing and ahead of the release of US inflation figures.  

USD/JPY Analysis Today - 12/03: CPI Data Awaited (Graph)

According to the economic calendar, the Japanese Cabinet Office released the country’s GDP figures for December 2023. The data showed that Japan avoided a technical recession in the fourth quarter of 2023, when the Japanese economy grew by 0.4% in December 2023, instead of contracting as expected. 

This confirmed the strength of the Japanese yen that we have seen recently against the dollar, with the pair falling from 147.07 yen to the dollar to 146.68 yen after the GDP figures were released. Even before that, the US dollar had been trading lower against the yen recently. In fact, according to currency trading platforms, USD/JPY fell to a multi-week low of 147.06 yen on Friday. Compared to the resistance of 150.47 on Monday, this is a significant decline that we have not seen since February 1st. 

Meanwhile, the Bank of Japan played a significant role in the increased selling of USD/JPY. Also, there have been hints from the Bank of Japan, supported by GDP data earlier this week, that they will soon abandon negative interest rates

The price of the US dollar enters a new week amid renewed confidence that the Federal Reserve will cut US interest rates in June. In fact, the 25-basis point cut has now been fully priced in for next June and last week’s jobs report showed easing wage pressures. For his part, Federal Reserve Chairman Jerome Powell told lawmakers last week: “We are waiting to become more confident that inflation is moving sustainably to 2 percent.” He added, “When we gain this confidence, and we are not far from it, it will be appropriate to reduce the level of restrictions so as not to push the economy into recession.” 

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Moreover, the markets are watching risk sentiment more broadly over the coming days, as the dollar price now appears to be responding to the ongoing improvement in sentiment. According to analysts, the past few weeks have seen a strong shift towards risk appetite as the biggest driver of US dollar behavior, and hence driving US dollar weakness. With global stock markets continuing to rise, volatility levels across a range of asset markets falling, and modest signs of recovery in various global purchasing managers’ indices, for example, there is justification for this shift. 

The rumors of recent interest rate hikes, along with the strength of the Japanese Gross Domestic Product “GDP” and the Japanese Yen, mean that we might see the USD/JPY pair declining for the first time in a long while. Although the recent upward trend of the US dollar may not be entirely over, it’s the Japanese Yen that could be in the spotlight temporarily – sooner rather than later. Ultimately, investors will be particularly attentive to any bullish surprises from US inflation data, which could support the US dollar ahead of the Federal Open Market Committee “FOMC” meeting on March 20. 

In fact, we might see US interest rate markets reassessing Federal Reserve expectations in response to the strongest inflation record so far, which boosts the attractiveness of the US dollar. 

Technically, it’s best to buy the US dollar against the Japanese Yen from support levels of 145.60 and 144.00 respectively. On the other hand, the psychological resistance at 150.00 will remain crucial for the strong bullish control over the USD/JPY. 

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