USD/JPY tracks Nikkei’s best jump since June 2020 to poke 116.00, Ukraine, US inflation in focus

• USD/JPY refreshes monthly top during four-day winning streak.
• Nikkei 225 rises the most in 19 months as oil prices drop, Japan PPI improves.
• Cautious optimism over Russia-Ukraine talks favor bulls ahead of US CPI.

USD/JPY rises for the fourth consecutive day to print the highest level in a month around 116.00 during the initial hours of Thursday’s Tokyo open.

In doing so, the yen pair portrays the market’s positive mood amid hopes of a ceasefire between Russia and Ukraine during today’s peace talks in Turkey.

Also favoring the USD/JPY prices is the run-up in Japan’s equity benchmark Nikkei 225. That said, the key equity gauge of Tokyo snaps a four-day losing streak to rebound from the lowest levels since November 2020, up 3.5% around 25,560 by the press time. It should be noted, however, that the US 10-year Treasury yields retreat while the S&P 500 Futures also fail to track Wall Street gains.

Furthermore, a 9.3% YoY print of Japan’s Producer Price Index (PPI) for February, versus 8.7% expected and 8.6% prior, also favored the USD/JPY bulls. Following the factory-gate inflation release, an anonymous BOJ official said, per Reuters, “Further increases in crude oil and grain prices are likely to push up Japanese wholesale prices with a several-month lag.”

Headlines from Ukraine, suggesting readiness to compromise, if Russia does the same, seemed to have boosted the market’s mood on Wednesday. However, Russian State Media mentioned that the Russian delegation at peace talks with Ukraine will not concede anything. Furthermore, the White House (WH) confronted the allegations that the US used chemical or biological weapons in Ukraine.

Elsewhere, US inflation expectations also retreat from record top and tease US dollar hawks as markets stay divided over the Fed’s 0.50% rate hike in March. The inflation gauge, as per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, refreshed record top to 2.9% before stepping back to 2.84% by the end of Wednesday’s North American trading session.

Apart from the Russia-Ukraine talks and the US Consumer Price Index (CPI) for February, likely rising to 7.9% from 7.5% prior, the monetary policy meeting of the ECB will also be important to watch for the USD/JPY traders.

Technical analysis

A clear rebound from the 100-DMA, around 114.50 by the press time, directs USD/JPY towards the 116.35 hurdle that was tested twice so far in 2022.