USD/JPY Plunged As Japan Inflation Mount

Fundamental Analysis

* Inflation Heat: The Japanese yen continues to strengthen against the U.S. dollar as inflation in Japan rises alongside a series of positive economic data. Recently, the Japanese Cabinet Office reported that the economy expanded at a solid pace of 0.7% in the fourth quarter of 2024, surpassing the 0.4% growth recorded in the previous quarter. This exceeded economists’ expectations of 0.3% growth. On an annualized basis, GDP surged by 2.8%, outpacing the 1.7% increase seen in the July-September period. The robust GDP figures are likely to reinforce expectations of a more hawkish stance from the Bank of Japan (BoJ). Additionally, core inflation in Tokyo rose to 2.5% in January, the fastest pace in nearly a year, aligning with market forecasts. This marks the third consecutive month of acceleration, keeping inflation well above the BoJ’s 2% target and fueling speculation of continued rate hikes.

Technical Analysis

*Technical Breakout: USDJPY was traded lower following recent retracement from the resistance level 152.10. MACD which illustrate bearish momentum signal with the formation of death cross suggest the pair to likely extend its losses.

* Resistance and Support: : If the bearish momentum persists, there’s a strong likelihood that the price will potentially head towards the level 149.550. Conversely, a potential reversal is also to be expected and the price could head back towards 152.10.

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Potential Risks

Looking ahead, traders will closely monitor key events this week for further market direction, including the FOMC Meeting Minutes, S&P Global Manufacturing and Services PMI, and speeches from former U.S. President Donald Trump. Additionally, yen traders will focus on Japan’s inflation report, set for release on Friday.

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Monitoring

Stay updated on US and Japan data, global market updates, central bank updates and any shifts in the US Dollar’s strength by following PU Prime’s market insights and daily financial news.

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Disclaimer: Trading derivatives involves high risks, and market conditions can change rapidly. The content is for informational purposes only and should not be considered as financial advice. Traders should conduct their own research and consider risk management strategies.