USD/JPY – Yen drifting as BoJ inflation matches forecast

USD/JPY continues to trade quietly. In Tuesday’s North American session, the pair is trading at 111.92, down 0.02% on the day. On the release front, the Bank of Japan’s preferred inflation gauge, BoJ Core CPI, improved to 0.5%, up from 0.4% in the previous release. This matched the estimate. In the U.S., the numbers were a mixed bag. New home sales jumped to 692 thousand, a 12-month high. However, Richmond Manufacturing index fell to 3, down sharply from 10 points a month earlier.

Crude has jumped to a 5-month high after the Trump administration announced that it would terminate sanction waivers given to some importers of Iranian oil, as of May 1. This move is intended to further tighten sanctions against Iran and cripple Iranian oil exports. The move has been bitterly criticized by Iran, which has upped the ante by threatening to close the Strait of Hormuz, a critical gateway for seaborne oil shipments. The rising geopolitical temperature could further boost oil prices, which are up 50% since December. Higher oil prices could weigh on economic growth and boost the safe-haven Japanese yen.

Will it be more of the same from the Bank of Japan? The markets aren’t expecting any rate moves, but investors will be closely monitoring the rate statement and outlook report regarding the economic outlook. The BoJ recently downgraded its regional growth forecasts, and a dovish message from the BoJ could weigh on the yen.

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Tuesday (April 23)

• 1:00 Bank of Japan Core CPI. Estimate 0.5%. Actual 0.5%
  
• 9:00 US HPI. Estimate 0.6%. Actual 0.3%
  
• 9:59 US Richmond Manufacturing Index. Estimate 10. Actual 3
• 10:00 US New Home Sales. Estimate 647K. Actual 692K
  
• 19:50 Japanese Services Producer Price Index 1.1%

*All release times are DST

*Key events are in bold

USD/JPY for Tuesday, April 23, 2019

USD/JPY April 23 at 11:30 DST

Open: 111.94 High: 112.03 Low: 111.65 Close: 111.92

USD/JPY Technical

USD/JPY edged lower in the Asian session but recovered most of these losses. The pair showed little movement in the European session and remains steady in North American trade

• 110.90 was tested in support earlier on Tuesday. It is a weak line
• 112.16 is a weak resistance line
• Current range: 110.90 to 112.16

Further levels in both directions:

• Below: 110.90, 110.28, 109.37 and 108.11
• Above: 112.16, 112.93 and 113.70

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