FX.co ★ USD/JPY: The yen comes in the wake of the dollar

The economy of Japan again demonstrated a positive trend: the GDP indicator has been increasing for the seventh consecutive quarter, thereby establishing a kind of record in the context of the duration of growth. And although the data published today is a little below the projected values, the dynamics still remain positive. While the structure of Japanese GDP a little lower, the focus now will likely be on the current behavior of the USDJPY pair. On one hand, the yen is expected to strengthen, but, on the other hand, this price movement is by no means connected with the successes of the Japanese economy.

It should be noted that at its last meeting, the Bank of Japan actually "preserved" the current parameters of monetary policy, due to the weak inflation in the country. And if earlier investors still had any hopes for changes, now they are almost gone, especially after the victory of Shinzo Abe in the parliamentary elections.

In early November, one of the closest to the Prime Minister (Taro Aso, who heads the Ministry of Finance) praised the head of the Japanese Central Bank Haruhiko Kuroda "for improving corporate profits, weakening the national currency and export growth." This signal indicates that in April next year Kuroda, most likely, will continue to fulfill his duties and will remain for the second term. This will give him the opportunity to continue his policy, which, in his own words, he is not going to change.

At yesterday's economic conference in Frankfurt, Germany, Kuroda repeated his position. He again commented on the low inflation, categorically defending the policy pursued by the central bank. Moreover, earlier, officials of the Japanese regulator underlined that the actions of their counterparts from the central banks of the United States, Canada, England " are not a decree" and they will adhere to a soft policy until inflation reaches 2%, even if it takes "years" .

This disposition indicates that Japan's domestic macroeconomic data are not now able to influence the yen's rate. Even if the consumer price index in November-December surprises the market with its growth, this factor will not determine the vector of the movement of the Japanese currency. For Kuroda, a stable trend, estimated in months and quarters, is important. Therefore, GDP growth under the conditions of the mentioned circumstances are just "numbers for information," but not more.

Considering the structure of GDP, it is worth noting the indicator of price changes, which grew by only 0.1% in annual terms. The dynamics are straightforwardly weak, so impulse inflation growth in the near future can not be expected. Especially considering the volume of personal consumption, which decreased by 0.5%.

foreign trade indicators did not show any surprises: net exports expectedly exceeded forecasts (including those due to the depreciating yen), for the same reason, the import index also declined.

In general, the Japanese economy was very upbeat with the steady growth, but the GDP deflator does not allow traders to count on any changes on the part of the Haruhiko Kuroda agency.

Such a fundamental picture suggests that the dollar/yen pair will soon follow the US currency. As the currency of "safe haven" yen is now of little interest to traders, they can focus only on American events.

Here, the focus is on tax reform and inflation. Published today, the consumer price index as a whole was in line with market expectations, because of which the dollar halted its decline: the indicator fell to 2% in annual terms and to 0.1% in the monthly. The sufficiently questionable figures are published in the context of further prospects for tightening monetary policy. On the one hand, the indicator remains near the target level, but, on the other hand, one can already speak of "structurally low inflation in the US economy." Traders were cautious of the current report, although the dollar is trying to return some of the lost positions due to the release of the projected figures.

A more complex issue is the tax reform. The US Treasury Secretary has already announced that Donald Trump will not support the adopted legislation if the corporate profit tax is ultimately higher than 20%. However, even in this form, the tax reform is still far from being approved by the Congress - according to analysts, discussion of this bill will be delayed at least until the end of this year.

Thus, the dollar today received little support from the CPI, but still generally remains under pressure. If the USDJPY pair is directly discussed, then the price remains in the range of 113.65 - 112.80 (this is the middle and lower lines of the Bollinger Bands indicator on the daily chart). Today, the bears attempted to break the lower boundary of the canal, but returned to the midline of the above indicator. Given this factor, in the medium term, the testing of the upper limit of the price channel, that is, the level of 113.65, can be expected.