USD/JPY: US core inflation interrupts dollar's slump, bearish trend prevails

USD/JPY Current price: 111.54

  • US core inflation unexpectedly rose, but figures fell short of impressing markets.
  • US Treasury yields soaring to  10-month highs.

The USD/JPY pair bounces from a daily low of 110.96, following the release of mixed US data. Retail Sales advanced as expected in December, up 0.4% in the month, although the control group number was slightly below market's forecast, up 0.3% vs. 04% expected. Inflation rose by 0.1% in the month in the same month, while the YoY figure matched market's forecast with a 2.1%. However, core inflation came to interrupt dollar's sell-off, unexpectedly accelerating in December amid increased demand during the holiday season. The numbers are no big surprise, and beyond some short-term reactions, seems unlikely that they could change the negative sentiment towards the greenback. Rising US Treasury yields are also helping the pair to bounce.

The pair's 4 hours chart shows that it´s entering positive territory for the first time today, but also that it holds well below the 112.00 level. Technical indicators in the mentioned chart indicate that the current advance is corrective, as they are currently bouncing from oversold levels, but still within bearish territory as the price remains far below moving averages. Above 111.60, the pair can extend its corrective movement up to 112.00, but selling interest will likely cap the rally around this last.

Support levels: 111.20 110.85 110.50

Resistance levels: 112.00 112.40 112.75

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