JPY, USD/JPY, CPI, RBA, Bank of Japan, Technical Outlook – Talking Points
- Asia Pacific markets prepare for rebound after US stocks rise as dollar strength stalls
- Japanese inflation data will show higher prices, but is unlikely to affect the Bank of Japan
- USD/JPY is trading at support, with bearish bias emerging on the 4-hour time frame
Tuesday’s forecast for Asia Pacific
Asia Pacific markets appear to be poised to open higher after the bullish trading session in New York. The high-tech Nasdaq-100 led gains in stocks in New York, closing up 0.77%, and the S&P 500 up 0.69%. The VIX Fear Measurement Index was down 2.01%. The FOMC will likely dictate market direction later this week, with the base case scenario calling for a 75 basis point hike. Price traders see a 1 in 5 chance of a larger increase of 100 basis points.
The DXY in US Dollars hasn’t changed much despite the higher short-term Treasury yields. Crude Oil prices have been trading almost flat as traders weigh the impact of rising global interest rates. Markets are expecting the SNB to raise interest rates into positive territory as inflation and a relatively strong currency support the SNB’s stance to tighten policy. The Bank of England interest rate will also be raised later this week.
Japan’s inflation rate is due this morning, with analysts expecting to see the nationwide consumer price index for August reaching 2.9%, according to a Bloomberg survey. That could be up from 2.6% in July. A higher rate, or even a higher-than-expected reading, is unlikely to sway BOJ policy makers from easy monetary policy, as Governor Kuroda sees price pressures as temporary. Despite this, Kuroda is likely to take a hard line against selling the Japanese yen.
The September minutes of the RBA meeting will go through the wires. Traders are buying AUD/NZD, pushing the AUD/NZD to its highest level since 2016. Bets on interest rates at the October RBA meeting have increased favoring a 50 basis point rise. Meanwhile, the Reserve Bank of New Zealand has already loaded much of its policy response, and New Zealand’s trade balance faces mounting headwinds.
Elsewhere, the South African rand fell to its lowest level against the dollar since early 2020. The country’s energy utility company implemented a Phase Six alert on Sunday, enforcing six hours of 24-hour blackouts. Natural gas prices in Europe fell by about 3%. The Chinese central bank is expected to keep the initial interest rates for the one- and five-year loan unchanged today.
Technical forecast for the USD/JPY pair
USD/JPY is trading above the 9-day exponential moving average (EMA) and the trend line from early September. A move higher would challenge the resistance at 144.99. The ascending triangle pattern indicates a bullish bias, but requires another top to touch. The Relative Strength Index (RSI) is flashing a bearish divergence, while the MACD is dim near its midpoint. A breach of the support level may open the door for a pullback to early September levels.
4-hour chart of USD/JPY
Chart created with TradingView
— By Thomas Westwater, Analyst for DailyFX.com
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