• USD/JPY dipped on Friday as investors digested the latest Tokyo CPI data, which offered fresh insight into Japan’s inflation trends.
• Tokyo’s annual core inflation slowed in February, falling below the Bank of Japan’s 2% target for the first time in 16 months, potentially increasing tensions with the government over future rate hikes.
•The data aligns with the Bank of Japan’s view that inflation will temporarily ease due to fuel subsidies and base effects from last year’s surge, before picking up again on steady wage growth.
• Tokyo’s core CPI, which excludes fresh food prices, rose 1.8% YoY in February, slowing from 2.0% in January and falling below the Bank of Japan’s 2% target for the first time since October 2024. The reading was slightly above the 1.7% market forecast.
•The Bank of Japan raised interest rates to 0.75% in December, a 30-year high, as it continues unwinding decades of ultra-loose monetary policy amid progress toward sustainably achieving its 2% inflation target.
• Immediate resistance is located at 156.48(38.2%fib), any close above will push the pair towards 157.48 (Higher BB).
• Support is seen at 155.06 (SMA 20) and break below could take the pair towards 154.30 (50%fib)
Recommendation: Good to buy around 155.40, with stop loss of 155.00 and target price of 156.50
