USD/JPY eyes BoJ Core CPI

The Japanese yen has started the new trading week with slight gains. In the North American session, USD/JPY is trading at 154.33, down 0.24% on the day.

BoJ Core CPI expected to rise to 1.8%

The Bank of Japan releases the Bank of Japan Core CPI, a preferred inflation indicator of the central bank. The market estimate for October stands at 1.8%, up slightly from 1.7% a month earlier.
National core inflation for October, released last week, crept higher to 2.3% y/y, up from 2.2% in September and above the forecast of 2.2%. Japan will release Tokyo Core CPI on Friday, which is expected to rise from 1.8% to 2.1%.

Will the rise in inflation push the Bank of Japan to raise interest rates at the next meeting on Dec. 19? The BoJ doesn’t have a good track record of being transparent and traders shouldn’t expect any strong signals ahead of the rate decision. Still, the BoJ is expected to raise rates at some point and continue the slow path towards normalization. If Ueda & Co. take a pass at the December meeting, the markets will be eyeing a rate cut in early 2025.

Over in the US, the Federal Reserve makes it next rate announcement on Dec. 18. A month ago a rate cut was considered likely but inflation has remained stubbornly high and that could dampen the Fed’s appetite for a third straight rate cut next month. The markets have currently priced the probability of a 25-basis point at 56% and a pause at 44%, according to the CME’s FedWatch.

USD/JPY Technical

• USD/JPY tested resistance at 154.58 earlier. Above, there is resistance at 155.19
• 154.13 and 153.52 and the next support levels

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