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Japanese Yen Holds Ground as Inflation Data Sinks the US Dollar. Lower USD/JPY?

Japanese Yen Holds Ground as Inflation Data Sinks the US Dollar. Lower USD/JPY?

Daniel McCarthy, Strategist

Japanese Yen, USD/JPY, US Dollar, US CPI, Crypto, FTX, PPI, Crude Oil, Gold - Talking Points

  • The Japanese Yen firmed dramatically after the US Dollar sailed south
  • US CPI sparked a rush toward growth assets, with equity markets roaring
  • If the Fed pulls back on hiking, does that mean USD/JPY has seen the cyclical peak?

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The Japanese Yen soared as the US Dollar sank across the board in a risk-on rally in the aftermath US CPI printing below expectations. The Greenback has made a small recovery in Asian session so far.

Headline CPI was 7.7% year-on-year instead of 7.9% forecast and 8.2% previously while the core number was 6.3% against 6.5% anticipated and 6.6% prior.

Treasury yields went lower, with the benchmark 10-year note crashing below 4% and touching 3.8%. It traded above 4.20% earlier in the week.

Hopes that the US central bank will step back from further jumbo hikes appear to be supported by comments made by several Fed speakers.

Fed presidents from many districts expressed their views, including Patrick Harker, Lorie Logan, Mary Daly, Loretta Mester and Esther George.

The overall message was that a measured approach would seem appropriate going forward, but that financial conditions needed to remain tight for the foreseeable future.

Equity markets roared higher in the North American cash session, with the Dow Jones up 3.70%, the S&P 500 adding 5.54% and the Nasdaq 100 rallying an astonishing 7.35%. Futures markets are pointing to a steady start to their Friday.

APAC equities followed the lead and are immersed in green across the regions, with Hong Kong’s Hang Seng Index (HSI) leading the way up with gains of over 7% at one stage.

Japanese PPI remains at an elevated level, with mixed results in today’s data. The month-on-month figure for October was 0.6% rather than 0.7% forecast and previously. The year-on-year read was 9.1% instead of 8.8% expected and 9.7% prior. The disparity is explained by an upward revision to previous months.

Crypto markets steadied amid the risk-on backdrop despite the carnage in the aftermath of the collapse of the FTX digital assets exchange earlier in the week.

Gold capitalised on USD weakness, touching US$ 1,760 overnight before settling near US$1,750 through most of the Asian day.

Crude was sluggish given the moves in other markets and added only marginal gains, with the WTI futures contract over US$ 86.50 bbl and the Brent contract eyeing US$ 94 bbl.

Looking ahead, UK GDP, trade and industrial production data will be followed the University of Michigan index of US consumer sentiment.

The full economic calendar can be viewed here.

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USD/JPY sold off toward an ascending trend line overnight but was unable to remain below it or the late September low of 140.35. These levels may continue to provide support.

Further down, sellers might see a hurdle at the breakpoint of 139.39.

The decline extended below the lower bound of the Bollinger Band based on the 21-day simple moving average (SMA). If price retreats back inside the band and closes within it, a pause in bearishness or a reversal might unfold.

Resistance could be at the breakpoints of 143.53, 145.11 and 145.47 or at the recent high of 148.85.


Chart created in TradingView

--- Written by Daniel McCarthy, Strategist for

Please contact Daniel via @DanMcCathyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.