The USD/JPY exchange rate has slipped to about 159.30 during the early hours of the Asian market on Friday. This movement comes as the Japanese Yen (JPY) gains ground against the US Dollar (USD), bolstered by fresh inflation data from Tokyo’s Consumer Price Index (CPI) that strengthens speculation about a possible rate hike from the Bank of Japan (BoJ) in September. Market participants are also keenly awaiting a speech by Federal Reserve (Fed) Chair Kevin Warsh at the Jackson Hole symposium later on Friday.
On Friday, Japan’s Statistics Bureau revealed that the headline Tokyo CPI increased by 1.9% year-on-year in August, up from 1.8% the previous month. Meanwhile, core CPI inflation rose to 1.8% year-on-year in August from 1.7% in July, with the earlier figure revised down from 1.9%. This outperformed market expectations, which had forecasted a rise to only 1.7%.
Additionally, CPI excluding food and energy—which the BoJ monitors closely as an indicator of underlying inflation—jumped to 2.0% year-on-year in August, compared to a revised figure of 1.8% from the previous month.
These numbers have bolstered expectations that the central bank might consider an interest rate hike as early as its policy meeting scheduled for September 17-18. As a result, this has provided some support to the JPY, creating upward pressure against the USD/JPY pair.
Traders are now preparing for remarks from Fed Chairman Kevin Warsh in Jackson Hole, Wyoming, which could provide insights into the US interest rate outlook. Any hawkish comments from Fed officials might help mitigate potential losses for the Greenback in the short term.
Yen softens as BoJ’s Himino strikes hawkish tone without explicit hike signal
Analysts at MUFG have noted that the Yen “weakened back in response” to remarks from Deputy Governor Himino, indicating some disappointment regarding the lack of a clear signal on the near-term policy direction. Although he didn’t explicitly indicate an interest rate hike in the upcoming month, MUFG explained that his general tone leaned toward hawkishness. In both his speech and subsequent press conference, Himino emphasized the BoJ’s need to “focus more on potential inflation risks,” signaling that future rate hikes could be on the table.
Technical Analysis: USD/JPY remains capped under the 100-day SMA
Looking at the daily chart, the USD/JPY pair continues to exhibit a capped movement as it remains below the 100-day Simple Moving Average (SMA) while trading just above the Bollinger middle band. The pair has retreated from its recent peaks. The Relative Strength Index (RSI) is at 47.09, suggesting a slight downside bias, indicating that upward momentum may be fading as prices fluctuate between the midpoint and the upper boundary of recent volatility.
On the upside, immediate resistance is reinforced by the 100-day SMA at 160.00, with the Bollinger upper band around 160.30 acting as the next critical threshold for bulls looking to regain a sustained upward trajectory. On the downside, initial support is identified around the Bollinger middle band at 158.85, followed by a more substantial support level at the lower band near 157.45. A drop below this could potentially trigger a broader correction.
