For the second month in row, we watch the Japanese national CPI rising yearly by the strongest pace since 2008 growing by 0.9% in August after rising in July by 0.7% because of the higher energy costs and also the figure excluding the fresh food has rose also by 0.8% last month which is also the highest rate since 2008.
These data show that there is a greater chance for dampening the deflation pressure by the current BOJ’s unprecedented easing steps and also show in the same time that there can be no need of further cheap liquidity to be added to Kuroda’s abenomics to be injected into the Japanese economy for fighting deflation while this figure can open the door for imposing higher sales taxes with less worries about the prices decreasing which can add also strength to the Japanese yen which has been hurt by BOJ’s decision of widening monetary base by the current scale which is from 60 to 70 trillion yen yearly.
while the Japanese government is in need for such an action which is expected be from next financial year and to be taken next month by God’s will for sustaining its financial position which is looking getting unsustainable after the efforts for spurring growth following 2011 earthquake and Shinzo Abe’s new financial plans while it can be requested now to push the wages higher amid rising of the prices.
The greenback is waiting also more information about the inflation over the consuming level today by God’s will as it is expected to watch Aug US PCE easing back to 1.2% y/y from 1.4% in July and weaker figure can show to the market that there is less probability to find the fed’s rushing to cut its current monthly scale of buying which can form a pressure on the greenback again.
While the market sentiment is expected to be well-contained ahead of the weekend by the US debt talks about a deal between the Republican Party and the Democratic Party for having agreement in the congress for hiking the debt ceiling from the current $16.7 trillion while the republicans are still pushing for further governmental spending cuts can put more weights on the economy which is still trying to surpass the negative effect of last march deployed sequestrations which have been imposed to save this year $85B for the government and to be continued yearly for 9 years to reach about $1.2 trillion of saving by God’s will.
By God’s will, USDJPY can meet now in the case of easing back further supporting level at 97.74 whereas it could rebound after it had been reached on the back on the Fed’s decision last week and breaking it can be followed by 97.44 before 96.80 and its breaking too can be followed by 96.38 which can be followed by 95.79 and its breaking too can open the door for reaching again 93.75 again however the downside momentum has started to get down since breaking the extended downward trend line from 103.72 to 101.56 in the beginning of this month to be near moving in a side way while going up can be met by a resistance now at 99.15 before 99.75 whereas it has ended its recent rebound from 97.74 and breaking it can open the door for the psychological resistance at 100 and its falling too can be followed by 100.60 whereas it has stopped on 11th of this month to start easing back while there are standing previous resisting levels over it at 100.83, 101.56, 102.51 before 103.72 whereas it has formed its peak of this year until now on 22nd of last May.
Kind Regards
FX Market Strategist
Walid Salah El Din
Mob: +20 12 2465 9143
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