Japanese Yen suffer loses as inflationary pressure Looms

Midday Update

The Japanese Yen remains one of the weakest currencies on Tuesday as inflationary pressure appears to be raising, although other economies such as US and UK are leading with food and fuel prices choking consumer spending in the near-term.

Bank of Japan Governor Kuroda indicated that nominal wages haven’t increased much, and it casts a shadow on the BoJ’s 2% target sustainable inflation, unless wages rise in sync with prices.

However, the yen could start to experience a turn if oil prices tumbles as it remains the major import that drives the manufacturing hub. Later in New York Session BoJ member Nakamura will be speaking and traders need to pay attention.

The USD extended gains above 115.50 early Asian session before sliding lower during the European Session. The weakness in Yen has been attractive to foreigners as yen denominated assets tend to be discounted when purchased with foreign currency.

The Dollar Index will remain trapped in a consolidation unless price successfully break the near-term resistance at 95.70 to reinforce a bullish bias in the short-term. Traders should look out for US trade balance statistics and Crude oil Inventories due for release later in the New York Session.

AUDJPY is currently in a consolidation as the pair maintains bullish outlook in the near-term after reclaiming 82.00. AUDJPY is currently trading above a 50-day moving average and 82.92 resistance remains the closest barrier for bulls in the near-term.

A break below 50-day moving average on 1 Hour chart could cause selling pressure as investors liquidates their holdings. Australia’s consumer sentiment going to be release later in New York session is a critical to the direction of the pair.

NZDJPY is among top gainers today ahead of New Zealand Inflation expectations (QoQ). The pair is trading near a 2-week high at 76.70 and challenging that near-term barrier remains critical to maintain a bullish bias in the near-term.

In Europe, stocks are rangebound as sentiments are still mixed among investors worrying over policy tightening cycle and geopolitical tensions. ECB president Lagarde, indicated on Monday at a European Parliament hearing that policy changes “will be very gradual” which somehow dampens the prospects of a near rate hike as investors anticipated after last week meeting.

The FTSE100 is trading at daily opening price as it failed to break above the 2 years high at 7637.0 during European session open. As always, remember the long held inverse relationship the FTSE100 has with the pound.

Elsewhere in commodities, Gold breached the last week high supported by inflation worries and lingering geopolitical risks. Traders are also capsized around the 200-day moving average, close to the $1,800 level.

Gold spot traded lower this morning after breaching the 1818 near-term resistance yesterday to set a new 2-week high at 1823.66. Mining stocks and equities were among the top performers on Monday with Chinese returning from the Lunar New Year Holiday.