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Inflation Data in Japan Fell Short of Analysts' Forecasts

3/6/2023 11:08 AM

The USD/JPY pair is moderately declining during the Asian session, trading at 135.73 and building on the corrective momentum formed on Friday, when the US currency retreated from its December 20 local highs.

At the end of last week, moderate support for the yen was provided by statistics from Japan: the manufacturing business activity index from Jibun Bank in January rose from 53.6 points to 54.0 points, and the unemployment rate in January fell from 2.5% to 2.4%, although analysts did not expect changes in both indicators. Business activity in the services sector in February rose from 52.3 to 54.0, exceeding forecasts of 53.6, expanding at the fastest pace in the last eight months. Experts believe that the situation will continue to improve amid the lifting of quarantine restrictions and an increase in tourist flow.

Inflation statistics did not live up to economists' expectations: the consumer price index in the Tokyo region slowed down from 4.4% to 3.5% compared to forecasts of 4.1%, while the core index fell from 4.3% to 3.3%, while analysts expected acceleration to 4.5%. Prime Minister Fumio Kishida instructed the government to develop a new package of measures to support the population: most likely, enterprises and some citizens in need will receive new state subsidies. Uncertain dynamics in consumer inflation lead investors to believe that the new head of the Bank of Japan, Kazuo Ueda, who will take office in April, will not rush to curtail the ultra-loose monetary policy initiated by his predecessor Haruhiko Kuroda.

Renewed data on the dynamics of gross domestic product (GDP) for the fourth quarter of 2022 will be released on Thursday, and the next meeting of the Bank of Japan on the interest rate will be held on Friday.

On the daily chart, Bollinger bands reverse into a horizontal plane: the price range is narrowing, reflecting the emergence of ambiguous trading dynamics in the short term. MACD reversed into a downward plane, forming a new sell signal (the histogram is below the signal line). Stochastic shows a more confident decline, quickly receding from its highs, which signaled that the US dollar might become overbought in the ultra-short term.

Resistance levels: 136.50, 137.50, 138.50, 139.50. | Support levels: 135.57, 134.50, 133.61, 133.00.

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