USD/JPY undeterred by Japan’s inflation figures, US PCE data from October looms

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  • USD/JPY is trading near 149.00, with 0.30% losses recorded.
  • Japan's inflation figures from Friday showed no surprises. Kazuo Ueada hints at uncertainty regarding a potential policy tweak.
  • US Dollar braces for key PCE information from October, which will likely impact the pair’s trajectory.

In Monday's trading session, the USD/JPY pair is experiencing a downturn, anchored currently at the 148.90 mark. No relevant events were released during the session, and investors await the Personal Consumption Expenditures (PCE) figures from the United States for October to be released on Thursday. On the other hand, markets digest inflation figures from Japan released on Friday.
 
According to the National Consumer Price Index (CPI) for October, there was an increase in inflation by 3.3% compared to the same period last year, marking a rise from the 3.0% observed in September. However, regarding the National CPI figures that excludes Food and Energy, there was a slight decrease to 4.0% on a year-on-year basis, down from 4.2% in the previous measure. Meanwhile, the National CPI that excludes Fresh Food showed a marginal increase, moving up to 2.9% from the earlier figure of 2.8%.

Kazuo Ueda, who heads the Bank of Japan (BoJ), expressed a reserved outlook regarding Japan's ability to achieve its inflation target of 2.0%. He also advised caution regarding market expectations for a near-term change in the Bank of Japan's policies. In that sense, if the markets do not get any additional guidance on a potential policy tweak, the upside will be limited for the JPY. For the rest of the week, investors will closely watch Japan's Retail Trade data for further insights into the Japanese economic outlook.

On the USD side, the week’s highlight will be Gross Domestic Product (GDP) figures for Q3 and the Core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve (Fed) preferred gauge of inflation. Its worth noticing that the outcome of the PCE data will shape the short-term expectations of the bank, likely impacting the trajectory of the pair.

USD/JPY levels to watch

The indicators on the daily chart reflect a somewhat mixed picture. The Relative Strength Index (RSI) currently has a negative slope and resides in negative territory, suggesting selling momentum dominates, aligning the Moving Average Convergence Divergence (MACD), which prints its rising red bars.

That said, despite bears exerting downward pressure and the pair residing below the 20-day Simple Moving Average (SMA), the USD/JPY still stands firm above the crucial 100 and 200-day SMAs. This positioning indicates that the bulls still have the upper hand in the overall trend, suggesting that the buying momentum remains strong from a broader technical perspective.

Support Levels: 148.15, 147.00, 146.80 (100-day SMA).
Resistance Levels: 150.00, 150.20 (20-day SMA), 151.00.

USD/JPY daily chart

 



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