The Japanese yen (JPY) fluctuated in a narrow trading range against its U.S. counterpart during the Asian session on Friday and reacted weakly to the country’s consumer inflation data, which declined in December as expected. Amid sluggish wage growth data released last week, Japan’s all-important Consumer Price Index (CPI) confirmed market expectations that the Bank of Japan (BoJ) will maintain a soft stance at its upcoming monetary policy meeting next week. This, along with stable dynamics in equity markets, could undermine the JPY’s safe haven status and allow the USDJPY pair to continue the upward trajectory seen over the past three weeks or so.

Meanwhile, the US Dollar (USD) is near a more than one-month high and continues to rise for the second week in a row amid lower bets on an imminent interest rate cut by the Federal Reserve (Fed). Data released on Thursday showed that initial jobless claims in the US fell to the lowest level in a year and a half, indicating a resilient labor market. This came on the back of stronger U.S. retail sales on Wednesday, which suggest the economy is in good shape and give the Fed room to raise rates further. This continues to push US Treasury yields higher and acts as a tailwind for the buck, confirming the positive outlook for the Dollar-Yen pair.

Recommendations: Trade predominantly on Buy from the current price level.