JPYINR: (Intra-day bias- Downward.
Support Jan futures- 56.00 and 55.85,
Resistance- 56.50 and 56.75)
Consumer Price Index (CPI) inflation showed a second consecutive monthly easing, recording 2.6% year-on-year in December, compared to 2.9% in November and a market consensus of 2.5%. This decline was primarily attributed to sustained government subsidies for utilities and energy, coupled with a higher base from the previous year. Core inflation figures, excluding fresh food and both fresh food & energy, also saw decreases, aligning with market expectations at 2.3% and 3.7% year-on-year, respectively. The government's ongoing energy and utility subsidy programs have played a pivotal role in the recent downtrend in inflation over the past two months.
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Given the subdued inflation and the additional impact of the earthquake in Ishikawa, it is likely that the Bank of Japan (BoJ) will opt to maintain its current stance at the January meeting. The headline drop in inflation is favourable for traders seeking short positions on the yen, taking advantage of the high carry. However, carry traders should exercise caution, considering the inherent risks associated with this strategy, such as the potential for significant overnight gap openings and substantial losses. Undertaking such strategies requires a high-risk appetite, with traders advised to implement proper stop-loss measures and maintain smaller position sizes for effective risk management.
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