USDJPY: the yen has temporarily strengthened against the US dollar

The increase in Tokyo’s core CPI and the stabilisation of unemployment in Japan contributed to the yen’s temporary strengthening. Following a correction in the USDJPY rate, the pair is expected to rise to 159.00. Find out more in our analysis for 27 December 2024.

USDJPY forecast: key trading points

• Tokyo core CPI (y/y): previously at 2.2%, currently at 2.4%
• Japan’s unemployment rate: previously at 2.5%, currently at 2.5%
• Japan’s industrial production (m/m): previously at 2.8%, currently at -2.3%
• USDJPY forecast for 27 December 2024: 157.00 and 159.00

Fundamental analysis

The core Consumer Price Index (CPI) measures changes in consumer prices of goods and services. This index is calculated for Tokyo and reflects Japan’s preliminary inflation data. The actual core CPI rose to 2.4% in November from the previous month, indicating improved living standards.

Fundamental analysis for 27 December 2024 considers that Japan’s unemployment rate remained unchanged at 2.5%. This stable indicator can be seen as a positive factor for the yen. Alongside other positive data, it could trigger a temporary strengthening of the Japanese currency.

The forecast for 27 December 2024 suggests that Japan’s industrial production might decline to -3.4% in November, while the actual reading came in at -2.3%. Unlike the previous figure, the indicator shifted to negative territory. There is little to view positively here for the yen, as Japan’s economy relies heavily on the manufacturing sector, which could lead to growth in the USDJPY rate.

USDJPY technical analysis

Having tested the upper Bollinger band, the price formed a Hanging Man reversal pattern on the USDJPY H4 chart. At this stage, the price continues to correct following the pattern signal. Since the quotes move within an ascending channel, the trend could resume after a pullback.

The growth target is the 159.00 resistance level. A breakout above this level could lead to stronger upward momentum.

However, an alternative scenario is possible, where the price corrects towards 157.00, with the USDJPY pair maintaining its upward trajectory and reaching new highs after the pullback.

Summary

Coupled with the USDJPY technical analysis, Japan’s positive fundamental data suggests a correction towards 157.00 before further growth.