Global macro overview for 30/06/2017

Global macro overview for 30/06/2017:

The inflation in Japan stays low again according to the data. The National CPI index in the month of May was released at the level of 0.4%, a little bit lower than the forecast for a 0.5% rise, but at the same level as a month ago. This means it was a fifth consecutive month when Japanese core inflation increased or stayed above zero percent. The consumer price index minus fresh food rose at an annualized 0.4% in May and this one was in line with expectations. Core inflation in Tokyo, a leading measure of nationwide price trends, was unchanged in May. Core prices in the capital city edged up 0.1% in April.

Nevertheless, according to the recent communications from the Bank of Japan, they are not poised to tighten monetary policy anytime soon. The bank has been very consistent in its message that the ultra-loose accommodative policy will stay in place until inflation levels rise closer to the BoJ's target of 2.0%. Despite years of stimulus from the BoJ, the inflation target remains out of reach so far. However, instead of lowering the inflation target, the rigid bank has insisted that it's only a matter of time before the improved Japanese economy triggers higher inflation. BoJ Governor Haruhiko Kuroda has assured markets that the latest burst of optimism won't lead to a material shift in monetary policy anytime soon, as the Bank remains committed to a low level of interest rates and quantitative easing, especially after the policymakers adopted yield-curve targeting.

Let's now take a look at the USD/JPY technical picture on the H4 time frame. The market has almost reached the 78% Fibo and then reversed sharply towards the level of 112.00, breaking the golden uptrend line. The bearish divergence indicates a possible deeper pullback towards the level of 111.44.

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