Japanese yen steady in thin trade

The Japanese yen has posted slight gains in the Thursday session. Currently, USD/JPY is trading at 104.67, down 0.17% on the day. With US markets closed for the Thanksgiving holiday and Friday an unofficial holiday, we can expect calm waters for USD/JPY for the remainder of the week.

Japan’s inflation indicators have been in focus throughout the week. The Services Producer Price Index (SPPI) came in at -0.6% in October, after a strong gain of 1.3% in September. Admittedly, Japan has suffered from chronically low inflation levels, but SPPI had not recorded a decline since May 2013. This was followed by BoJ Core CPI, which is the Bank of Japan’s preferred inflation gauge. The index has hovered close to the zero level for most of 2020. Later on Thursday, we’ll get a look at another important inflation indicator, Tokyo Core CPI (23:30 GMT). The index has reeled off three straight declines, and no relief is expected for November, with a forecast of -0.6%.

This prolonged lack of inflation is reflective of weak economic conditions, as consumers aren’t spending and exports are down due to lower global demand for Japanese products. The Bank of Japan is not expected to alter its ultra-accommodative monetary policy in the near future. The central bank purchases government bonds worth trillions of yen each year, but this has failed to raise inflation anywhere near the bank’s inflation target of around 2 percent.

Japan’s economy continues to limp along, but this hasn’t prevented the yen from making substantial inroads against the US dollar. Earlier in November, USD/JPY dropped to a monthly low of 103.17, as the yen pushed the greenback to its lowest level since the first week of March.

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USD/JPY Technical Analysis

• There is resistance at 104.76. This is followed by resistance at 105.69
• 103.28 is the first line of support. Below, there is support at 102.73
• The 20-day MA line remains relevant. Currently, it is situated just above the pair

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