Japanese yen can’t find its footing

• US unemployment claims fall to 187K
• Japan’s core CPI expected to ease to 2.3% on Friday

The Japanese yen has stabilized on Thursday. In the North American session, USD/JPY is trading at 148.04, down 0.08%.

Is yen headed back to 150?

The Japanese yen continues to show strong volatility. The yen is down 2.1% this week and has endured a brutal January, with a decline of 4.98%. The January losses have completely erased December’s gains of 4.85%.

The US dollar has roared early in the new year, and the yen finds itself back in familiar territory, within striking distance of the 150 level. If the yen breaches 150, we are sure to hear warnings of currency intervention from Japan’s Ministry of Finance (MoF). Investors have learned that the MoF has on occasion backed up its rhetoric with action, as in September 2022 when it intervened in the currency markets in order to prop up the ailing yen.

The markets have been rife with speculation that the BoJ is planning to tighten policy this year and raise rates out of negative territory. The BoJ has insisted that this won’t happen until it is convinced that inflation is sustainable. Although inflation indicators have been above the 2% target for well over a year, Governor Ueda says that inflation has been driven by cost-push factors and that higher wage growth is needed as evidence that inflation is sustainable.

We’ll get a look at Japan’s Core CPI on Friday. Core CPI fell to 2.5% y/y in November, down from 2.9% in October and the lowest level since November 2022. The market estimate stands at 2.3% and investors will be looking for the BoJ’s response to the inflation release.

In the US, the labour market continues to show resilience. Unemployment claims fell to 187,000, down from 203,000 a week earlier and below the market estimate of 207,000. This was the lowest reading since September 2022.

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USD/JPY Technical

• USD/JPY tested support earlier at 147.92. Below, there is support at 147.33
• There is resistance at 148.75 and 149.34

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