- USD/JPY extended downside amid continued U.S dollar sell-off.
- Japan announced encouraging consumer inflation and job data.
- The pair might keep plunging, with sellers targeting the 130 support.
USD/JPY price plunged to its lowest mark since 17 June as the latest dollar strength waned. The pair plummeted towards the 132.35 lows, approximately 4.51% beneath this month’s highest level. Furthermore, it seems primed for more drops.
Soaring Japan Inflation
USD-JPY price noted sharp declines following the recent Japanese economic data. The statistic agency revealed that Tokyo’s headline inflation increased from May’s 2.3% to June’s 2.5% this year. Baring volatile energy and food prices, the city’s inflation surged to 2.3% from 2.1%.
These are crucial figures as Tokyo represents most of the nation’s economy. Moreover, they indicate the surging commodity prices and the contribution of the weak JPY to the soaring prices. The escalating inflation has triggered a sharp drop in retail sales.
Still, Japan boasts a lower inflation rate than pear nations such as the United Kingdom and the United States. More data showed that Japan’s labor market is strong. The unemployment rate stayed unaltered at 2.6%, whereas the jobs-application ratio increased to 1.27 from 1.24.
Furthermore, USD-JPY indicated that the nation’s industrial production increased to 8.9% from 7.5% in June. The USD-JPY exchange rate plunged as analysts trusted the Fed would engage the tightening brakes early than anticipated. Also, the agency’s data showed the nation slumped into recession in Q2 as trade deficit and inflation surged. Thus, analysts expect the Fed to begin reducing interest rates this year.
According to the 4hr chart, the USD-JPY declined sharply within the previous few weeks. The pair plummeted towards the 132.30 lows, the lowest mark since June. The downward move saw it moving beneath the ascending trend-line. Furthermore, USD/JPY plunged under the 25- and 50-day Moving Averages as the RSI (Relative Strength Index) moved beneath the 24 oversold areas. Thus, the pair might keep plummeting as sellers target the crucial support barrier at 130.
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