USD/JPY extends decline to 132.00 as USD remains under pressure

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  • 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.

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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.”

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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.

Technical levels

Source: Fx Street

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