Japanese Yen, USD/JPY, CPI, RBA, BoJ, Technical Outlook – Talking Points
- Asia-Pacific Markets Will Recover After US Stocks Rise As Dollar Stops Strength
- Japanese inflation data shows rising prices, but unlikely to affect the BOJ
- USD/JPY trading against support, with downward bias over a 4-hour timeframe
Tuesday’s Asia-Pacific Outlook
Asia-Pacific markets appear to open higher after a bullish trading session in New York. The tech-heavy Nasdaq-100 Index (NDX) led stock gains in New York, closing 0.77% higher, and the S&P 500 gaining 0.69%. The VIX ‘anxiety meter’ index fell 2.01%. The FOMC is likely to set the market direction later this week, with the base case calling for a 75 basis point increase. Rate traders see a 1 in 5 chance of a bigger 100 bps surge.
The US Dollar DXY index had changed little despite rising short-term government bond yields. Crude oil prices remained virtually flat as traders weighed in on the impact of rising global interest rates. Markets expect the Swiss National Bank (SNB) to raise interest rates to positive territory as inflation and a relatively strong currency bolster the SNB’s policy. A Bank of England rate hike is also scheduled for later this week.
Japanese inflation is expected this morning, with analysts expecting the nationwide consumer price index (CPI) to reach 2.9% for August, according to a Bloomberg survey. That would be higher than July’s 2.6%. Raised interest rates, or even a higher-than-expected printout, are unlikely to deter policymakers at the Bank of Japan from accommodative monetary policy, as Governor Kuroda views price pressures as temporary. Though Mr. Kuroda is likely to take a tough stance on JPY shorts.
The September minutes of the Reserve Bank of Australia meeting will cross the line. Traders are buying AUD against the New Zealand dollar, pushing the AUD/NZD to its highest level since 2016. Interest rate bets ahead of the October RBA meeting are up towards a 50bp gain. Meanwhile, the RBNZ has already preloaded much of its policy response, and New Zealand’s trade balance faces mounting headwinds.
Elsewhere, the South African rand plunged to its lowest level against the greenback since early 2020. The country’s electric utility implemented a Stage 6 warning on Sunday, imposing six hours of power outages over a 24-hour period. European natural gas prices fell by approximately 3%. And China’s central bank is expected to leave first- and 5-year bond interest rates unchanged today.
USD/JPY Technical Outlook
USD/JPY is trading above the supportive 9-day exponential moving average (EMA) and a trendline from early September. A move higher would challenge the resistance at 144.99. An Ascending Triangle pattern implies a bullish bias, but it would require another contact high. The Relative Strength Index (RSI) is showing bearish divergence and MACD is moderate near the midpoint. A break below the support could open the door to a pullback to early September levels.
USD/JPY 4-hour chart
Chart created with TradingView
— Written by Thomas Westwater, analyst for DailyFX.com
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