USD/JPY holds above 145.00 | 27 September 2024

USDJPY:

The USD/JPY pair is attracting buyers towards 145.20 on Friday during the early Asian session. Following the release of the Consumer Price Index (CPI) in Tokyo, the pair consolidated near three-week highs. Analysts will be monitoring the release of the US Personal Consumption Expenditure (PCE) price index for August, due later on Friday.

The latest data from the Statistics Bureau of Japan shows that Tokyo's core CPI increased by 2.2% in September, up from the 2.6% rise seen in August. Meanwhile, the consumer price index, excluding fresh food and energy, increased by 1.6% in September, up from the previous reading of 1.6%. The Tokyo consumer price index, excluding fresh food, increased by 2.0% in September, in line with the market consensus forecast of 2.0%. This represents a slight deceleration from the 2.4% rise seen in August.

The Japanese yen (JPY) has depreciated in response to the release of Tokyo's CPI inflation data. The Bank of Japan (BoJ) is unlikely to be deterred from raising interest rates this year, despite slowing price growth. BoJ Governor Kazuo Ueda has promised to raise borrowing costs if the economy performs as expected.

Nevertheless, the lack of clarity surrounding Japan's interest rate trajectory could constrain JPY appreciation and provide a boost to USD/JPY in the near term. In a statement released this week, Ueda indicated that the Japanese central bank is not inclined to act hastily in raising rates and may opt to await further data before making any decisions. It is not anticipated that the BOJ will alter its rates at the forthcoming meeting in October.

Conversely, the Federal Reserve last week implemented a significant reduction in interest rates and indicated that a further 50 basis points will be cut before the end of the year. On Thursday, Federal Reserve Chair Janet Yellen stated that she supported last week's 50 basis point interest rate cut as a means of addressing heightened downside risks to employment. We anticipate that softer remarks from Fed officials will result in a weaker dollar against the yen in the near term.

On Friday, market participants will be closely monitoring the release of the core US personal consumption expenditure (PCE) price index for August, which is the Fed's preferred inflation gauge, in search of new indications. Should inflation rise unexpectedly, this may dampen hopes of a rate cut at the November meeting and provide some support for the US dollar (USD).

Trade recommendation: Trading mainly by Sell orders from the current price level.

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