Morning Note: Tokyo Inflation Slows, US Core PCE Price Data, Canada GDP

Tokyo Inflation Slows but Stays Above BOJ Target

Core consumer prices in Japan's capital rose 2.2% in February compared to a year earlier, according to data released at 23:50 GMT on Thursday. This marked the first slowdown in four months, although the rate remained well above the central bank's 2% target. The slowdown primarily reflects reinstated subsidies aimed at curbing electricity and gas bills. However, the underlying trend remains unchanged as food prices continue to remain high. The persistently high inflation will likely support the case for the central bank to continue its monetary policy tightening campaign.

(USD/JPY Daily Chart, Source: Trading View)

From a technical analysis perspective, the USD/JPY currency pair has been in a bullish trend since mid-September 2024, as indicated by the formation of higher highs and higher lows. However, bearish forces regained control in mid-January 2025, pushing the price downward, as evidenced by the lower highs and lower lows within the descending channel.

The pair found temporary support within the 148.70 – 149.40 zone and is expected to retest the swap zone at 150.70 – 151.50. If the price manages to break above this zone, it may indicate that bullish momentum has regained control, potentially driving the price higher once again.

Investor Awaits US Core PCE Price Data

The December U.S. Core PCE Price Index recorded a year-over-year increase of 2.8% and a month-over-month rise of 0.2%. The forecast for January anticipates a slight moderation in the annual rate to 2.7%, while the monthly increase is expected to accelerate to 0.4%. These data are set to be released at 13:30 GMT. This projection suggests that while underlying inflationary pressures may be gradually easing on an annual basis, monthly price gains could reflect stronger consumer demand or temporary cost pressures. The uptick in the month-over-month figure might be driven by factors such as resilient wage growth, elevated services inflation, or seasonal effects, even as the overall disinflation trend remains intact.

(U.S Dollar Index Daily Chart, Source: Trading View)

From a technical analysis perspective, the overall trend of the U.S. Dollar Index has been bullish since the end of September 2024, as indicated by the formation of higher highs and higher lows. However, the index began to decline in early February 2025, marked by a significant double-top candlestick pattern.

The index has broken above the swap zone at 106.50 – 106.80, suggesting a high probability of an upward surge, potentially further retesting the resistance zone at 107.90 – 108.20. If the index successfully breaks above that resistance zone, it indicates that bullish momentum has regained control, increasing the likelihood of further upward movement.

Canada's GDP Expected to Rebound

Canada’s GDP contracted 0.2% in November and is expected to rebound 0.2% in December. This data is set to be released at 13:30 GMT. This may be due to a temporary slowdown in November due to sector-specific weaknesses like manufacturing or resource extraction, which may have stabilised in December. Additionally, seasonal factors, holiday season consumer spending, and business activity may have contributed to the expected growth.

(USD/CAD Daily Chart, Source: Trading View)

From a technical analysis perspective, the USD/CAD currency pair has been in a bullish trend since the beginning of October, as indicated by the formation of higher highs and higher lows. Recently, it found support in the 1.4120–1.4170 support zone, rebounded strongly, and even broke above the swap zone at 1.4300–1.4340 with significant bullish momentum. This valid bullish structure may likely lead to further upside, potentially driving the price to new record highs.

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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.