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Japanese CPI Rises

The Japanese Yen is turning higher today on the back of the latest set of inflation figures, released overnight. BOJ core CPI was seen rising to 3.4% last month, up from 3.3% a month prior and above the 3.3% the market was looking for. With JPY continuing to depreciate over recent weeks, speculation has been building that the BOJ might be forced to intervene once again. However, today’s inflation data is now seeing those declines pause for now, helped by a retreat in USD.

US Yields Falling – Data Due

USD has slipped in line with the fall back seen in US treasury yields yesterday. After popping to above 5%, yields on 10-year paper fell back to around the 4.84% level by end of day driven, it seems, by a tweet from Bill Ackerman. The hedge fund titan tweeted that he was closing out the short bond position citing global uncertainty and an underlying weakness in the US economy. Looking ahead today, USDJPY has room to correct lower still if we see US PMIs coming in short of forecasts. Both readings are expected to have fallen back into negative territory last month which, if confirmed, should be enough to keep USD weakness on the table into the middle of the week.

Technical Views

USDJPY

The rally in USDJPY has become more labored over recent weeks. While price has continued to hug the bull channel top, growing bearish divergence on momentum studies suggests reversal risks are growing near-term. If we do correct more meaningfully here, 145 will be the next key support to note. 
 

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