Forex traders await inflation data out of the US, which is expected to show an annualized increase of 2.5%. The US Fed is closely following developments on the inflationary front but prefers the core PCE Deflator of the GDP report. An increase in inflationary pressures may force the central bank into an unexpected interest rate increase, derailing the fragile economy. How will price action in the USDJPY react following the release of today’s CPI report? Today’s fundamental analysis will take a look at price action in both directions.
Japan has long struggled with the absence of inflation, and today’s minor increase as measured by the Domestic Corporate Goods Price Index doesn’t change it. The Bank of Japan has noted that more aggressive steps may be required to raise inflationary pressures. A revision to coronavirus cases rattled financial markets this morning, boosting safe-haven demand for the Japanese Yen. Can the USDJPY extends its sell-off as the trading day matures? Subscribe to the PaxForex Daily Fundamental Analysis and earn over 5,000 pips per month.
Here are the key factors to keep in mind today for US Dollar trades:
- US CPI: The US CPI for January is predicted to increase by 0.2% monthly and by 2.5% annualized. Forex traders can compare this to the US CPI for December, which increased by 0.2% monthly and by 2.3% annualized. The US Core CPI for January is predicted to increase by 0.2% monthly and by 2.2% annualized. Forex traders can compare this to the US Core CPI for December, which increased by 0.1% monthly 2.3% annualized.
- US Initial Jobless Claims and Continuing Claims: US Initial Jobless Claims for the week of February 8th are predicted at 210K and US Continuing Claims for the week of February 1st are predicted at 1,748K. Forex traders can compare this to US Initial Jobless Claims for the week of February 1st, which were reported at 202K and to US Continuing Claims for the week of January 25th, which were reported at 1,751K.
Here is the key factor to keep in mind today for Japanese Yen trades:
- Japanese Domestic Corporate Goods Price Index: The Japanese Domestic Corporate Goods Price Index for January increased by 0.2% monthly and 1.7% annualized. Economists predicted a flat reading of 0.0% monthly and an increase of 1.5% annualized. Forex traders can compare this to the Japanese Domestic Corporate Goods Price Index for December, which increased by 0.1% monthly and 0.9% annualized.
Should price action for the USDJPY remain inside the or breakdown below the 109.550 to 110.100 zone the following trade set-up is recommended:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 109.750
- Take Profit Zone: 107.650 – 108.200
- Stop Loss Level: 110.300
Should price action for the USDJPY breakout above 110.100 the following trade set-up is recommended:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 110.300
- Take Profit Zone: 110.950 – 111.350
- Stop Loss Level: 110.100
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