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14 Mar 2023

USD/JPY rises toward 135.00 after US CPI fueled by Treasury yields

  • US Dollar gains momentum after US inflation numbers. 
  • US CPI rises mostly in line with expectation in February. 
  • USD/JPY up 250 pips from Monday's low, looking at 135.00.

The USD/JPY broke a range after the beginning of the American session and following the release of US CPI numbers. The pair is trading above 134.70, at daily highs as the US dollar strengthens.

Dollar gains momentum, no surprises from consumer inflation 

US February Consumer Price Index rose 0.4% in February, as expected, while the annual rate slowed down from 6.4% to 6%. The core CPI rose 0.5%, slightly above the 0.4% of market consensus. 

The US Dollar stayed relatively quiet immediately after the report. However, the Greenback gained momentum later as US yields moved further to the upside. US Treasury bonds are erasing most of Monday's gains. The rebound in yields is fueling the USD/JPY. 

"Inflation has peaked – but that is not news anymore. The issue is that price rises are not falling, just becoming sticky. Moreover, the peak in yearly inflation remains at risk if Core CPI comes out above 0.3%", explained Yohay Elam, analyst at FXStreet. Just a week ago the question regarding the Fed was 25 or 50bp rate hike. Now is it no change or 25bp. According to the market's response so far to CPI, there still is a chance of a hike. More US inflation data is due on Wednesday with the Produce Price Index. Also Retail Sales numbers will be released. 

The USD/JPY is erasing Monday's losses and is approaching the 20-day Simple Moving Average (135.40). The intraday outlook is bullish, however the main picture offers mixed signs. If the move higher extends above 135.60, it could gain more momentum. On the contrary, a slide below 133.50 would expose the three-week low it hit on Monday ay 132.26. 

Technical levels 

 

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