USD / JPY is almost unchanged in Wednesday trading. In the European session, the pair is trading at 106.28, down 0.10% on the day.
Japanese inflation in focus
The focus is on Japan’s inflation indicators with three inflation releases this week. On Tuesday, the inflation figure was a mixed bag. The BOJ Core CPI, the preferred inflation gauge for the Bank of Japan, remains at low levels. In June, the tick index was lower at 0.0%, down from 0.1% a month earlier. There was better news from the Services Producer Price Index, which rose to 1.2% in July, rising from 0.8% in advance. This was the strongest gain since March. Tokyo Core CPI will be released on Thursday. The index improved to 0.4% in July and is expected to mark lower at 0.3%.
Weak inflation levels reflect weak economic activity, but have also enabled the Bank of Japan to run huge tax deficits at a relatively low price. The bank continues to maintain an inflation target of 2%, which will remain an unrealistic target in the near future. In April, the BoJ expanded its stimulus program and promised to buy an unlimited number of bonds. If inflation rises, the bank may be forced to reduce its massive stimulus program.
USD / JPY Technical Analysis
The USD / JPY gained ground in the Asian session, but then reversed direction. The pair are flat in the European session
- 105.99 is the next support line. This is followed by support at 105.57
- There is weak resistance at 106.62. The next resistance line is at 107.42
- USD / JPY continues to put pressure on the 10-day MA. If the pair breaks below this line, it would be a bearish signal for the pair