The USD/JPY pair maintained its strong bid tone for the second consecutive session and jumped to fresh session high following upbeat US macro data.
Currently trading around 114.80 region, the pair caught fresh bids and surged to fresh multi-week peaks after data released from the US showed headline inflation, as measured by CPI, rose to an annualized rate of 2.5%, while prices excluding energy and food advanced 2.3% y-o-y, beating consensus estimates.
Meanwhile, monthly retail sales also surpassed expectation and recorded m-o-m growth of 0.4% and core retail sales (excluding automobile sales) also registered a strong growth of 0.8% inter-month.
In addition to this, Empire State Manufacturing Index also jumped to 18.7 for the month of February, as compared to 7.0 expected and January’s 6.5, and reinforced Tuesday's hawkish comments from the Fed Chair Janet Yellen.
Upbeat data reaffirmed market expectations for an eventual Fed rate-hike action, sooner-rather-than-later, and provided an additional boost to the bullish sentiment surrounding the greenback. In fact, the key US Dollar Index is now testing fresh multi-week highs near 101.70 region and has been supportive of the pair’s strong bid tone for the second straight session.
Omkar Godbole, Analyst and Editor at FXStreet notes, "pair’s rebound from the confluence of the rising trend line and 5-DMA on Tuesday followed by a highest daily close (114.26) in two weeks, coupled with the break in the RSI above 50.00 and bullish crossover on the DMI suggests the spot is likely to extend gains today to 50-DMA seen at 115.00 levels."
He further writes, "the only factor that warrants caution is the ADX line, which is still sloping downwards - indication of a weak trend. On the downside, a daily close below 113.00 (confluence of 10-DMA and descending trend line) would signal the rally from the recent low of 111.61 has ended and the spot could revisit 112.00-11.61 levels over the next few days."