Selling USDJPY on higher-than-expected Japanese inflation data

Important Japanese economic data is expected to be published tomorrow. At the opening of the Asian session, the government will report on changes in the Japanese labor market for November and the inflation rate for December.

Recall that the Ministry of Finance and the Bank of Japan took a long-term course to tighten their monetary policy, with a tentative goal to bring the interest rate to the level of 2.0%.

The implementation of incremental steps requires constant confirmation that the labor market is heating up and the consumer price level is rising. For Japan, the lack of inflationary pressures as a condition for economic growth has been a problem for the past 30 years.

If the value of the core CPI is higher than the forecasted 2.5%, it will serve as an additional argument for the supporters of tightening and push USDJPY down. In this case, the Tokyo Consumer Price Index (YoY) above 2.6% will strengthen the downward momentum for USDJPY.

A drop in the unemployment rate below the forecasted 2.5% would also confirm the trend of a stronger labor market and provide support to the Japanese Yen.

The overall recommendation is to sell USDJPY, provided that the value of the core CPI is above 2.5% and the unemployment rate is below 2.5%. 

Profits should be taken at the level of 156.800. A Stop loss could be set at the level of 158.00. 

The volume of the opened position should be set in such a way that the value of a possible loss, fixed with the help of a protective Stop loss order, is no more than 1% of your deposit funds.