- US dollar tumbles across the board on the worst day in months.
- Inflation numbers trigger a rally in Treasuries.
- USD/JPY looks for another test at the 100-day SMA.
The USD/JPY collapsed following the release of US inflation data. The numbers triggered a sell-off of the US dollar across the board, pushing the pair toward 132.00
Before the release of the US CPI, USD/JPY was trading near 135.00. Recently it bottomed at 132.00. The pair is back into negative territory for August. Below 132.00, attention would turn to the 100-day Simple Moving Average at 131.05/10. The mentioned SMA capped the downside a week ago.
The move lower took place amid a broad-based decline of the dollar that is still going on. The DXY is falling more than 1.50%, as it trades under 104.70. The US 10-year yield is at 2.74%, after bottoming at 2.67%.
Lower yields, risk appetite and expectations of a less aggressive Federal Reserve weighed on the USD/JPY. The annual US CPI rate dropped from 9.1% to 8.5%, against the market consensus of 8.7%. Analysts at Commerzbank, pointed out that inflation has probably passed its peak. “However, the collapse in the price of gasoline played a decisive role. The further decline in the inflation rate is therefore likely to be slow.”
Market participants still see the Fed raising rates at the next meeting, which will be in September. Before the meeting, August inflation data will be published.
US Inflation Analysis: It is peak inflation only until the Fed's verdict, stock rally at risk
Technical levels
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