USD/JPY: it's all about US inflation today

USD/JPY Current price: 107.37

  • Yen advanced to its highest since Nov. 2016 against the greenback.
  • Treasury yields recovered after Tuesday's slump, still in the red for the week.

The USD/JPY pair plunged to 106.83, its lowest since November 2016, as the dollar remained weak and US Treasury yields continued retreating. The 10-year note benchmark hit a low of 2.80%, fueling demand for the safe-haven yen, although a recovery in yields and the positive tone of European equities helped the pair bounce to the current 107.40 region. Japan released its Q4 GDP which showed that the economy grew at an annualized rate of 0.5% in the three months to December, well below market's forecast of 0.9%, or the previously revised 2.2%, cooling down hopes of the BOJ's trimming QE sooner than later.

Market players are now waiting for the US January inflation figures. US CPI is seen up in the month 0.3% and by 1.9% yearly basis. The expected numbers shouldn't be considered impressive, but better-than-expected numbers will probably fuel fears of a faster pace of rate hikes coming from the US and unleash another round of panic selling on Wall Street.

The pair remains biased lower short-term, given that in the 4 hours chart, it is developing below its 100 and 200 SMA, which accelerated their declines over 100 pips above the current level, while technical indicators stabilized well into negative territory after correcting oversold conditions. The pair is hovering around 2017 yearly low, unable to clearly recover above it, further backing the case of a bearish continuation ahead. The pair has now scope to test the 106.00/20 region on a break below 106.80, now the immediate support.

Support levels: 106.80 106.50 106.10

Resistance levels: 107.70 108.00 108.35

View Live Chart for the USD/JPY

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