The USD/JPY pair failed to build on its tepid recovery move and has now dropped back to near three-week lows, below the 112.00 handle following today’s US macro data.
The pair ran through some fresh offers and moved back closer to the very important 200-day SMA support after data released from the US showed headline CPI increased 0.5% m-o-m in September, lifting annual inflation back above the Fed's medium-term target to 2.2% (1.9% previous).
Meanwhile, the measure excluding food and energy prices, core CPI rose 0.2% inter-month, with yearly rate holding steady at 1.7%.
Adding to this, retail sales rose sharply and recorded a strong monthly growth of 1.6% during September, following a 0.2% contraction August, while excluding automobile, sales also rose sharply by 1.0%.
The readings, except core retail sales, were slight below consensus estimates and seemed denting December Fed rate hike action. The same is evident from a sharp slide in the US Treasury bond yields, which was eventually seen weighing on the US Dollar and dragging the pair lower.
Today’s US economic docket also features the release of Prelim UoM Consumer Sentiment, along with Fedspeaks, but seems unlikely to hinder the pair's fresh bearish momentum.
Technical levels to watch
A follow through weakness below 111.80 level is likely to accelerate the fall towards mid-111.00s before the pair eventually drops to test the 111.00 handle.
On the upside, mid-112.00s now seems to have emerged as immediate resistance and is followed by 112.80-85 hurdle and the 113.00 handle.
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