USD/JPY rises amid volatile trading as APAC session eyes Chinese inflationary gauges

Wednesday’s Asia-Pacific outlook

Volatility looks set to persist in today’s Asia-Pacific session after a wild day on Wall Street overnight when stocks swung heavily between gains and losses. The conflict in Ukraine continues to drive market sentiment and uncertainty as fighting readies to enter its third week, and Russia is reportedly shipping additional military assets from its far east regions. Meanwhile, the international business community removed itself further from Russia today after Coca-Cola and McDonald’s announced a halt of business operations in the country. The Japanese yen caught some haven-bids versus the risk-sensitive Australian dollar and New Zealand dollar but fell versus the US dollar.

The United States, joined by the United Kingdom, announced a ban on Russian oil imports, a move aimed at further degrading Russia’s energy-reliant economy. Although Russian energy imports make up only a small portion of US imports, gasoline prices moved higher into record territory, according to today’s AAA national average of $4.173. WTI crude oil was trading just over $125 per barrel in New York this morning. The euro managed to halt a six-day slide versus the US dollar.

Energy prices elsewhere surged higher, adding to recent gains that may start to threaten economic demand. Natural gas and coal prices moved higher across Europe and Asia. That, along with rising metal prices, will likely soon start to threaten metal production. China may be particularly susceptible if elevated prices persist as the country aims to boost metal-hungry infrastructure investment this year. China nickel company Tsingshan is reported to face a loss of around $8 billion in the nickel market. The London Metal Exchange (LME) suspended nickel trading on Tuesday and has so far not announced when trading will resume.

This morning, Japan reported fourth-quarter final GDP growth of 4.6%, missing the 5.6% Bloomberg consensus forecast. China will report February inflation and factory-gate prices at 01:30 GMT today. The consumer price index (CPI) and producer price index (PPI) are expected to cross the wires at 0.9% and 8.7%, respectively. Higher-than-expected figures may throttle Beijing’s willingness to loosen policy in the coming months amid the extreme volatility in global supply chains. The Australian dollar and Chinese yuan may provide the best candidates to gauge the market’s reaction to the data.

USD/JPY technical forecast

USD/JPY is moving slightly higher this morning near its March high. A break above the 116 level could invigorate bulls to attack the 2022 high at 116.35. Both the MACD and RSI oscillators show healthy upward momentum, putting on a bias for additional strength in the short term. Alternatively, a break lower may see support from the 23.6% and 38.2% Fibonacci retracement levels. The 100-day Simple Moving Average (SMA) may defend a deeper pullback if one comes.

USD/JPY daily chart

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