The USDJPY currency pair again crossed the boundary of the price zone, in which the Ministry of Finance of Japan intervenes to maintain an acceptable exchange rate of the national currency.
At the same time, factors that reduce the probability of such interventions have recently appeared. It is about the slowdown in inflationary pressure in the Japanese economy, which does not contribute to the policy tightening measures.
Today's government data showed that the nationwide core consumer price index (CPI), which excludes fresh food items, rose 2.2% from a year earlier after gaining 2.6% in March.
The core consumer price index rose 2.2% year-over-year in April, but it declined from the March value.
Japan's core inflation slowed for the second straight month in April. Mild consumption is likely to increase the BoJ's caution on rate hikes.
Inflation data is seen as key to further decisions on rate hikes by the Bank of Japan, which is gradually moving away from a decades-long ultra-soft monetary policy.
Rising bets on further Bank of Japan policy tightening this year sent Japan's 10-year government bond yield briefly to 1% this week, a level the market hasn't seen since 2013.
In general, the decline in inflation, although it complicates the prospects of the Bank of Japan to raise the interest rate, but does not change course on policy tightening.
From a technical point of view, the USDJPY pair aims to return to the level of 156.5 for a retest. This expectation of downward movement is also confirmed by the formed divergence of the price with the RSI indicator.
The final recommendation is to sell USDJPY.
Profit should be taken at the level of 156.5. A stop-loss could be set at the level of 157.7.
The value of possible loss should not exceed 2% of your deposit funds.
This content is for informational purposes only and is not intended to be investing advice.
