🚩USDJPY drops below 150 as markets react to higher than expected flash Tokio CPI reading
The Japanese yen is recording a very strong appreciation today, and we can look for reasons for this in today's inflation data from the Tokyo region. The market took the higher-than-expected reading of price pressures from Japan as a sign of a likely BoJ rate hike in December, about which economists are still not convinced. The pair fell from a high of 156 in mid-November, breaking an upward streak, and is now trading below the psychological barrier of 150. The sell-off on USDJPY is also driven by the weakening US dollar, which is today one of the weakest G10 currencies; USDIDX loses 0.4%.
- Preliminary CPI inflation from the Tokyo region, rose 2.6% y/y in November; beating forecasts of 2.2% after 1.8% previously, and core CPI of 2.2%, against 2% forecasts and 1.8% previously. Fresh food prices excluding energy rose 1.9% y/y, in line with forecasts. The unemployment rate indicated 2.5%, vs. 2.4% previously
- Other data from Japan fared less well, however. Japan's industrial production in October rose 1.6% year-on-year, below the 2% forecast. On a month-to-month basis, it rose 3% versus 4% forecasts and 1.6% previously. However, the economy ministry estimates that output will fall -2.2% m/m in November and -0.5% m/m in December
- Japan's retail sales in October rose 1.6% y/y, forecast to rise 2% after 0.5% in September. Month-on-month growth indicated 0.1% versus 0.4% forecasts. Japanese consumer sentiment indicated 36.4, versus 36.5 expectations, slightly above 36.2 previously. House construction starts fell -2.9% y/y vs. -2% forecasts and -0.6% decline previously.
Published data from Japan at first glance gives a mixed picture, as inflation rose slightly more than expected, but retail sales and industrial production disappointed forecasts. Still, both industrial and retail sales data were higher year-on-year and month-on-month. The Bank of Japan will decide on interest rates on December 18, and USDJPY quotes seem to reflect a slightly higher probability of a rate hike.
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The dollar-yen pair is retreating below the 200-session exponential moving average (the red line EMA200) on the daily interval today, signaling a potential trend reversal. For the bulls, the target now remains the 150 level, which has turned from support into resistance.
Source: xStation5
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