USDJPY dips around 139.00 on US data and geopolitical tensions

• The Producer Price Index in the United States slows down, which suggests the impact of the Federal Reserve’s policy.
• After two US inflation reports, the dollar weakened on hopes the Fed will pause rate hikes.
• Japan’s GDP contracted, justifying the loose policy of the Bank of Japan.
• The Russian missiles hit Poland, although confirmation remained pending.

The USDJPY struggles to break above the 100-day EMA at 140.82 and falls after the release of a US inflation report bolstering the Fed’s arguments and moderating the pace of rate hikes. In addition, geopolitical tensions arose when it was reported that two Russian missiles had hit Poland. USDJPY is trading at 139.05, shedding 0.58% on the day.

Sentiment remains fragile after the events in Poland. It has been reported that Ukrainian forces intercepted a Russian rocket that plunged into Poland, causing the tragedy. It should be noted that the Polish authorities have not expressed an official version of what happened. At the time of this writing, the White House said it could not confirm the reports coming from Poland.

Aside from this, US stocks have regained some ground behind the headlines from Poland. The US Department of Labor (DoL) revealed that the Producer Price Index (PPI) for October grew 8% yoy, below estimates of 8.3%, while, excluding volatile items, the so-called Core PPI rose 6.7% yoy, less than 7.1% forecast. Now that the CPI and PPI reports are in the rear view mirror, they suggest that US inflation is cooling,

On the other hand, Federal Reserve officials commented that a slowdown in the tightening of monetary conditions would be desirable, but at the same time stressed that the job is not done. On Tuesday, Atlanta Fed President Raphael Bostic said the Fed must be persistent. For his part, Fed Vice President for Surveillance Michael Barr warned that the economy could experience “significant weakening” following the Fed’s actions.

On the Japanese front, the data revealed that the Gross Domestic Product (GDP) for the third quarter contracted by 1.2%, compared to the growth of 1.1% estimated by analysts, which justifies the monetary policy of the Bank of Japan (BoJ). BoJ Governor Haruhiki Kuroda continually expressed that the central bank would maintain easy monetary policy conditions to stimulate the Japanese economy.

What to watch out for

Machinery orders and the tertiary industry index for September stand out on the Japanese economic agenda. In the United States, the agenda will include the MBA 30-year mortgage rate, along with import and export prices, retail sales and industrial production. In addition, Fed speakers such as New York Fed President John Williams will make remarks.

Key USDJPY Technical Levels