USD/JPY calm after mixed inflation numbers

USD/JPY is almost unchanged in Wednesday trade. In the European session, the pair is trading at 106.28, down 0.10% on the day.

Japanese inflation in focus

The spotlight is on Japan’s inflation indicators, with three inflation releases this week. On Tuesday, inflation numbers were a mixed bag. BOJ Core CPI, which is the preferred inflation gauge of the Bank of Japan, remains at low levels. In June, the index ticked lower to 0.0%, down from 0.1% a month earlier. There was better news from the Services Producer Price Index, which climbed to 1.2% in July, up from 0.8% beforehand. This was the strongest gain since March. On Thursday, Tokyo Core CPI will be released. The index improved to 0.4% in July and is projected to tick lower to 0.3%.

Weak inflation levels reflect weak economic activity, but has also enabled the Bank of Japan to run huge fiscal deficits at a relatively low cost. The bank continues to stubbornly cling to an inflation target of 2%, which remains an unrealistic goal in the near future. In April, the BoJ expanded its stimulus program, promising to buy an unlimited amount of bonds. If inflation levels do rise, the bank could be forced to reduce its massive stimulus program.

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USD/JPY Technical Analysis

USD/JPY gained ground in the Asian session but then reversed directions. The pair is 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

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