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Japanese Yen Wilts as Inflation Woes Grip Markets Ahead of US CPI Today

Japanese Yen Wilts as Inflation Woes Grip Markets Ahead of US CPI Today

Daniel McCarthy, Strategist

Japanese Yen, USD/JPY, US Dollar, BoJ, GBP/USD, Crude Oil, Gold, US CPI - Talking Points

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The Japanese Yen remains near 24-year lows after Japanese PPI came in hotter than anticipated at 9.7% year-on-year to the end of September instead of the 8.9% forecast.

This has raised market concerns about the ability of the Bank of Japan (BoJ) to maintain extremely loose monetary policy. USD/JPY raced above 146 in the North American session but stopped just short of 147. The market is weighing the possibility of selling by the BoJ. A currency that continues to weaken could lead to imported inflation.

Treasury yields dipped in the US session but have ticked up a few basis points across the curve in Asian trading today.

Federal Open Market Committee (FOMC) meeting minutes released overnight re-affirmed the hawkish perspective of the bank. There was some acknowledgment of the need for calibration at some point but that was seen as a way off for now.

The US Dollar is fairly steady across the board and Sterling held onto overnight gains amid growing tension around the consequences of the Bank of England withdrawing from the Gilt market after Friday.

Gold is holding ground just above US$ 1,670 an ounce while base metals such as iron ore and copper continue to tread water. Australia’s ASX 200 saw small gains as did the Australian Dollar. Other APAC equity markets are in the red on growth concerns.

Crude oil has been languishing so far today after OPEC and the US Energy Information Administration (EIA) cut their outlook for crude oil demand overnight. They cited concerns around economic growth, inflation and Chinese Covid-19 related lockdowns. A report also showed an increase in US inventories last week of 7 million barrels.

The WTI futures contract is just above US$ 87 bbl while the Brent contract is around US$ 92.50 bbl at the time of going to print. USD/CAD is again scoping the 2-year high at 1.3855 seen on Tuesday.

After a series on European inflation figures, the focus will be on US CPI. The market is expecting 8.1% year-on-year for the headline number according to a Bloomberg survey of economists. The Fed has been very vocal of late in expressing a hawkish stance and today’s CPI could impact their rhetoric going forward.

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USD/JPY remains in an ascending trend channel as it continues toward a 24-year high.

A bullish triple moving average (TMA) formation requires the price to be above the short term simple moving average (SMA), the latter to be above the medium term SMA and the medium term SMA to be above the long term SMA. All SMAs also need to have a positive gradient.

Looking at any combination of the 10-, 21-, 55-, 100- and 200-day SMAs and the criteria for a TMA have been met.

Resistance might be at the 161.8% Fibonacci Extension at 149.35. On the downside, support may lie at the break point of 145.90 or the recent low at 143.53.


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.