Daily Report: Yen Stays Weak after CPI

The Japanese yen remains the weakest major currency for the week and the month after release of inflation data in Asian session. National CPI core dropped -0.4% yoy in October, improved from -0.5% yoy in September and met expectations. Tokyo CPI core dropped -0.4% yoy in November, unchanged from October’s reading and met expectations. The negative national CPI core reading marked the eighth straight month of annual decline in prices. BoJ adopted a new Yield Curve Control frame earlier this year aiming at pushing up inflation. But it’s generally acknowledged that much time is still needed for meeting the 2% target. Nonetheless, recent sharp decline in Yen due to surge in global bond yields could have some inflationary effect for Japan and ease some pressure on BoJ. Also released in Asian session, Japan corporate service price index rose 0.5% yoy in October. New Zealand trade deficit narrowed to NZD -846m in October.

In Eurozone, ECB warned in a biannual report that US could become more “inward-oriented” under Donald Trump’s administration. The report noted “higher political uncertainty may lead to more domestically focused, growth-hindering policy agendas.” And, “this, in turn, could delay much-needed fiscal and structural reforms.” ECB vice president Vitor Constancio said that “there may be some protectionist measures or not, every day we read contradictory news.” And, “that’s very risky in a situation where world trade is already very weak.” And in the end “world trade and growth will suffer”.

Looking ahead, UK will release Q3 GDP revision, index of services and CBI realized sales. US will release trade balance and wholesale inventories.

Daily Pivots: (S1) 118.79; (P) 119.27; (R1) 120.06; More…

EUR/JPY rises to as high as 120.10 so far today as recent rally continues. Intraday bias stays on the upside for long term fibonacci level at 121.36. At this point, we’d expect strong resistance from there to limited upside. However, considering the break of long term trend line resistance, further upside acceleration would indicate trend reversal. On the downside, below 118.98 minor support will turn bias neutral and bring consolidation first.

In the bigger picture, a medium term bottom is in place at 109.20 and rebound from there would extend. However, momentum isn’t convincing enough for trend reversal yet. Hence, in case of stronger rise, we’d be expecting strong resistance from 38.2% retracement of 141.04 to 109.20 at 121.36 to limit upside, at least on first attempt. However, sustained trading above 121.36 will pave the way to 126.09 key support turned resistance.

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
21:45	NZD	Trade Balance (NZD) Oct	-846M	-950M	-1436M	-1394M
23:30	JPY	National CPI Core Y/Y Oct	-0.40%	-0.40%	-0.50%
23:30	JPY	Tokyo CPI Core Y/Y Nov	-0.40%	-0.40%	-0.40%
23:50	JPY	Corporate Service Price Y/Y Oct	0.50%	0.30%	0.30%	0.20%
9:30	GBP	GDP Q/Q Q3 P		0.50%	0.50%
9:30	GBP	Index of Services 3M/3M Sep		0.80%	0.80%
11:00	GBP	CBI Realized Sales Nov		12	21
13:30	USD	Advance Goods Trade Balance Oct		-59.2B	-56.5B
13:30	USD	Wholesale Inventories Oct P		0.30%	0.10%

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

Daily Report: Yen Stays Weak after CPI