Currency Analyst since 2010

USD/JPY: data play against yen

By Elizabeth Belugina

USD/JPY retraced more than half of the losses made in the previous week and recovered to 113.00 area. The pair is supported on the downside as the negative risk sentiment subsided, but lacks decisive drivers on the upside.

Japanese inflation data came out lower than expected. Tokyo core CPI contracted by 0.3% in March. The Bank of Japan released its own inflation measure, which showed 1.1% growth in prices. Yet, the market sees that the situation in Japanese economy isn’t getting any better, and the pressure on the central bank to ease policy at the end of April is building. This is a positive factor for USD/JPY.

Next week pay attention Japanese industrial production and Tankan manufacturing index. The nation’s weak manufacturing PMI allows us to expect that these indicators will also disappoint. Thus, traders and analysts will increase their expectations of additional easing by the Bank of Japan. US labor market data on Wednesday and Friday as well as Janet Yellen’s comments on Tuesday will be another driver of the pair. All in all, the market has realized that US economic fundamentals haven’t changed much since December when the Fed raised the rate. As a result, USD/JPY has room to recover to 114.00. Support is at 112.30, 112.00 and 111.00.     

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