Halister News

(Bloomberg) -- USD/JPY may adopt a bid tone if Japan’s December CPI slows in line with forecast, spurring investors to contemplate a dovish BOJ stance at the policy meeting next week, Bloomberg strategist David Finnerty writes.

• USD/JPY is presently driven by position adjustments to the “Trump trade”, but signs of slowing inflation in Japan could prompt BOJ to signal at its Jan. 31 meeting the potential for a more dovish policy
  • Since BOJ adopted the current yield curve control policy in September, the central bank’s own inflation gauge has yet to show a positive trend; indeed, it is forecast to slow to 0.1% y/y in December from 0.2% in November, the lowest since Sept. 2013
• BOJ’s opinion statement in December noted that “Japan is at a critical juncture with regard to achieving price stability and sustainable growth,” indicating that a series of weaker readings may lead it to tweak its policy in 2017
• Japan’s December headline will rise 0.2% y/y in December versus 0.5% y/y in November, according to median est. of economists in Bloomberg survey; data due 8:30am local time Jan. 27
  • Timelier Tokyo CPI for January is expected to confirm a lack of price pressure with median est. of 0.0% y/y, unchanged from the previous momth
• USD/JPY finds initial technical support at 112.53, Jan. 24 low with resistance at 114.96, 50-DMA and 115.62, Jan. 19 high

• NOTE: David Finnerty is an FX strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice.