USDJPY TECHS: Bull Cycle Remains In Play

NOK had already been weakening into this morning’s inflation data, so the one-tenth downward surprise to CPI-ATE (2.77% Y/Y vs 2.9% cons, 3.1% Norges Bank and 3.01% prior) wasn’t enough to spur additional weakness in the currency. 

• At first glance, this doesn’t seem like enough of a downward surprise to change the picture ahead of Norges Bank’s June 19 decision. Softer underlying inflation pressures than expected in the March MPR should weigh on the June MPR rate path, but this may be offset by stronger activity outcomes. Focus turns to Thursday’s Regional Network Survey – the last key rate path input.
• Headline CPI was stronger-than-expected at 3.00% Y/Y (vs 2.7% cons and Norges Bank, 2.47% prior).
• An initial read of the May drivers seem in line with expectations: Statistics Norway writes that “After a decrease in food prices as a result of various Easter offers last month, prices have now risen again. At the same time, increased electricity prices are helping to lift price inflation”…” Despite rising food prices, we see a decline in the growth rate of the CPI-ATE in May. Lower airfares and reduced growth in rents are helping to pull down price inflation”.
• Elsewhere, Swedish April monthly GDP was 0.4% M/M, above the three-analyst strong 0.3% consensus. We don’t read too much into this revision-prone series month-to-month, and neither do markets. SEK is little changed following the release.

• RES 4: 93.05 1.382 proj of the May 22 - 27 - 29 price swing
• RES 3: 93.00 Round number resistance      
• RES 2: 92.79 1.236 proj of the May 22 - 27 - 29 price swing
• RES 1: 92.63 High Jun 5  
• PRICE: 91.81 @ Close Jun 9
• SUP 1: 91.44 Low Jun 4 
• SUP 2: 91.16/90.59 Low Jun 2 / Low May 29
• SUP 3: 90.11 Low May 22 and the bear trigger   
• SUP 4: 90.00 Round number support        

Gilt futures continue to trade closer to their recent highs. The latest rally undermines the recent bearish theme - a key short-term resistance at 91.87, the May 20 high, has been cleared. This signals scope for an extension higher and sights are on 92.79, a Fibonacci projection. Initial firm support to watch is unchanged at 91.44, the Jun 4 low. A break of this level is required to signal a possible reversal.

• The wage data there all a bit softer than expected, including the key private regular AWE data that was 2 tenths below consensus.
• The unemployment data was in line with expectations, rising to 4.6%.
• A really big miss for the very volatile flash PAYE RTI payrolls number at -109k for May. Take that with a handful of salt. But the April figure being revised down to -55k (rather than revised up) is a little concerning here.
• Overall the data is on the soft side.
• GBPUSD fell around 15 pips on the release but didn't challenge its overnight lows.