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CPI Falls As Expected

JPY

Spot USD/JPY finished the day nursing some small losses, the pair closed at 105.69 after being as high as 105.92 heading into the European time zone. Moves in the pair remain a function of fluctuations in the greenback. EUR/JPY gained through the day, closing around 30 pips higher just shy of 127.80.

  • Data earlier in the session showed CPI fell 0.6% Y/Y in January, slightly better than estimates. Core prices fell 0.6%, in line with estimates. The declines are attributed to a resurgence in coronavirus cases which forced the government to suspend a tourism discount programme. The BoJ are scheduled to hold a policy review in March, the CPI print concurs with the narrative that price declines are due to temporary factors.
  • The latest RTRS sources piece noted that "the Bank of Japan may replace some numerical guidelines for its purchases of exchange-traded funds with a pledge to ramp up buying when markets become volatile
  • From a technical perspective USD/JPY maintains a bullish tone and is trading closer to recent highs following Tuesday's rally. Tuesday's climb resulted in a break of resistance at 105.77, Feb 5 high. This confirms a resumption of the uptrend that started Jan 6 and reinforces the significance of the recent key technical break - the breach on Jan 27 of the bear channel resistance drawn of the Mar 2020 high. The focus is on 106.26 next, a Fibonacci projection.
  • Market participants look ahead to the preliminary Feb print of Jibun Bank Japan PMI at 0030GMT/0830HKT, while the Rinban operations are due at 0110GMT/0910HKT.

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