USD/JPY jumps to 145.00 following hot US inflation data

On the last day of the week, the USD/JPY rose near the 145.00 zone, showing more than 2% of weekly gains. This movement was driven by a vital Producer Price Index (PPI)  from the US for July and optimistic personal consumer confidence data released by the University of Michigan (UoM). The US treasury bond yields are increasing and show more than 1% of daily gains from this. On the Japanese side, Yen continues to trade weak as investors continue to place bets on a dovish stance by the Bank of Japan (BoJ).

Hawkish bets on the Fed after inflation data favoured the USD

PPI data on Friday saw the headline figure jumping to 2.4% YoY in July, slightly higher than expected. This comes with the US releasing this week that the headline and core Consumer Price Index (CPI) decelerated in the same month, so overall, the US inflation outlook is mixed.

That being said, the US bond yields are seeing gains across the curve driven by hawkish bets on the Federal Reserve. The 10-year bond yield rose to 4.18%, while the 2-year yield stands at 4.90% and the 5-year yielding 4.31%, respectively. In line with that, the CME FedWatch tool indicates that the odds of a 25 basis point (bps) hike in the November meeting rose to nearly 30% but remain low for the upcoming September decision.

On the JPY’s side, no relevant data was released, and the focus shifted to next week's Gross Domestic Product (GDP) data from Q2 from Japan.

USD/JPY Levels to watch

Considering the daily chart, the USD/JPY shows a bullish outlook for the short term. The Relative Strength Index (RSI), positioned above its midline in positive territory with a northward slope, supports this view along with the positive indication from the Moving Average Convergence Divergence (MACD), which is displaying green bars, pointing towards a strengthening bullish trend. On the other hand, the pair is above the 20,100,200-day  Simple Moving Averages (SMAs), indicating that the bulls are in command of the broader picture.

Support levels: 143.70, 143.00, 142.00.

Resistance levels: 145.00, 145.50, 146.00.

USD/JPY Daily chart