Downward Trend Unabated

Summary:

USDJPY has recorded a fifth consecutive weekly decline, with prices falling to the vicinity of 140.47 on Monday. Japan's core CPI, which rose by 3.2% YoY has further bolstered market expectations for a potential rate hike by the Bank of Japan (BOJ), thereby fueling the yen's appreciation.

SELL USDJPY

Close Time

CLOSED

141.700

Entry Price

138.150

145.000

158.461 +0.774 +0.49%

330.0

Pips

Loss

138.150

145.000

Exit Price

141.700

Entry Price

145.000

Fundamentals

Following the long weekend, the yen sustained its bullish momentum against the US dollar on Monday. Japan's inflation rate continues to exceed the target set by the Bank of Japan (BOJ), while concerns over a potential global economic recession triggered by trade wars persist. These factors have collectively dampened investor sentiment and driven capital towards the safe-haven Japanese yen.

On Monday, Japan's Ministry of Internal Affairs and Communications reported that the core CPI (excluding fresh food) increased by 3.2% YoY in March, accelerating from the previous month's 3.0% and aligning with market expectations. This marks the third consecutive year that the rate has surpassed the BOJ's 2% target. The core CPI excluding food and energy also rose more sharply, from 2.6% to 2.9%. While the overall CPI inflation rate eased slightly from 3.7% to 3.6%, which indicates that inflation remains persistently high.

The most notable aspect of the inflation data was the significant surge in rice prices, which skyrocketed by 92.5%, marking the fastest rise since records began in 1971. This surge was driven by a combination of factors, including crop failures due to extreme heat in 2023 and panic buying by consumers following earthquake warnings last year. This marks the sixth consecutive month that rice inflation has hit a record high.

In response, the Japanese government has intervened by releasing over 210,000 tons of rice from its reserves and plans to auction an additional 100,000 tons this month to stabilize supply.

Apart from food, household durable goods prices rose by 6.5%, up from 5.4% in February. Energy prices, although still elevated, have seen a slight decline from 6.9% to 6.6%.

Additionally, due to market turbulence related to tariffs, market expectations for the BOJ to raise interest rates by at least 25 basis points this year have increased. Investors currently anticipate two rate hikes in Japan by December. Previously, despite data showing an acceleration in consumer price index (CPI) inflation, the market was highly skeptical about returning to the pre-tariff levels. The probability of a 25 basis point rate hike in June was as high as 80%. Currently, the yen appears to be attracting some safe-haven flows, with the USDJPY exchange rate falling to its lowest level since September.

Technical Analysis

USDJPY has extended its downward trend today, with intraday movements remaining biased to the downside. A break above the recent downtrend channel would signal an acceleration of the decline. The current decline began at 151.27 (a Summation AB=CD pattern), and is expected to extend below the 139.57 support level.

On the upside, a breach of the minor resistance at 144.07 would turn the intraday trend neutral again. However, as long as the 151.20 resistance level holds, the overall trend will remain bearish.

Trading Recommendations

Trading Direction: Sell

Entry Price: 141.70

Target Price: 138.15

Stop Loss: 145.00

Valid Until: May 06, 2025, 23:55:00

Support: 140.47/139.55/138.04

Resistance: 142.17/144.06/144.61

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Downward Trend Unabated

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