USD/JPY: Dollar falls on concerns of higher US bond yields
- USD falls despite an upbeat US CPI.
- Higher US bond yields are seen negative for the economy and equities.
USD/JPY is now trading around 107.00 in New York session, falling by almost 0.8% after the US stock market U-turned from negative to positive following the key US inflation data making.
The report on the US inflation rose 2.1% over the year in January, beating the market expectation with closely watched core inflation rising 1.8% y/y. In the knee-jerk reaction, the USD/JPY jumped as high as107.89. Although higher CPI may be good for USD theoretically, as Fed may be compelled to hike 3 times in 2018, higher US interest and higher bond yields are not good for the overall US economy and the stock market as borrowing costs will rise. This is why it might be seen as long-term US Dollar negative.
Should the US stock market fall as a consequence of higher inflation, the USD might come under pressure on the concern of risk aversion.
At the same time, the US core retail sales fell 0.3% m/m in January indicating "stagflation" or a combination of the upbeat core CPI and negative core retail sales.
Technical view
Price action suggests that USDJPY now has to sustain above 107.00-107.30 area; otherwise, it is seen retracing to 106.10 and 105.65-105.40 zone. For any meaningful recovery, it must stays above 108.00-108.50 area for 109.00-109.75 and then 110.20-110.55/110.85 zone in the days ahead.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.