- The US dollar falls across the board, on the worst day in months.
- Inflation figures cause a rally in Treasuries.
- USD/JPY looks for another test of the 100-day SMA.
The USD/JPY plummeted after the release of US inflation data. The figures triggered a US dollar sell-off across the board, pushing the pair towards 132.00.
Before the US CPI release, USD/JPY is trading near 135.00. It has recently bottomed out at 132.00. The pair has re-entered negative territory in August. Below 132.00 attention would turn to the 100-day SMA at 131.05/10. The aforementioned simple moving average capped the decline a week ago.
The move lower took place amid a general decline in the dollar that is still continuing. DXY is down over 1.50% as it trades below 104.70. The 10-year yield in the US stands at 2.74%, after bottoming out at 2.67%.
Lower yields, risk appetite and expectations of a less aggressive Federal Reserve weighed on USD/JPY. The annual rate of the US CPI fell from 9.1% to 8.5%, against the market consensus of 8.7%. Commerzbank analysts note that inflation has probably passed its peak. “However, the collapse in the price of gasoline has played a decisive role. Therefore, the further decline in the rate of inflation is likely to be slow.”
Market participants continue to see the Fed raising rates at the next meeting in September. Before the meeting, inflation data for August will be published.
Source: Fx Street