USD/JPY spikes post-US CPI, lacks follow-through
- The US bond yields spike on hotter-than-expected US core CPI and provided a minor lift.
- The USD remains on the defensive amid expectations for 50 bps rate and capped gains.
The USD/JPY pair built on its steady intraday bounce from weekly lows and spiked to 108.35 area post-US CPI, albeit quickly retreated few pips thereafter.
The bearish pressure surrounding the US Dollar - triggered by the Fed Chair Jerome Powell's dovish remarks on Wednesday, eased a bit following the release of hotter-than-expected US core CPI figures - rising 0.3% on a monthly basis (0.2% expected) and ticking higher to 2.1% yearly pace from 2.0% previous.
The reading was strong enough to offset a deceleration in the headline CPI (on expected lines) and triggered a sudden spike in the US Treasury bond yields, which extended some support to the greenback and assisted the pair to recover a major part of its early slide to sub-108.00 level, or weekly lows.
It, however, remains to be seen if the pair is able to capitalize on the recovery move or fizzles out at higher levels amid reviving hopes for an aggressive Fed rate cut. Hence, Powell's second day of testimony before the Congress might continue to infuse some volatility and produce some meaningful trading opportunities.
Technical levels to watch
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
