- US yields fall behind US data, helping the Japanese yen across the board.
- USD / JPY remains sideways, testing the 113.25 / 30 zone.
USD / JPY is falling to fresh lows for the day at 113.28 on Friday. Previously, the pair peaked at 113.79 before turning lower amid some dollar weakness following US data.
Yields Fall, Yen Rises
The Japanese yen gained momentum across the board after the release of the US CPI for November. The numbers were in line with expectations, with an annual rate rising to 6.8%, the highest since 1982. Those numbers cause US bond yields to drop. The 10-year bond fell to 1.47% and the 30-year bond to 1.85%. Next week is the FOMC meeting.
“The Fed’s concern will be that today’s high inflation could fuel expectations of higher inflation tomorrow and the day after tomorrow and so on. This can then be passed on to salary demands, and in an environment of decent business pricing power, we see those costs being passed on to customers. The Fed will be willing to avoid this (or will be willing to tolerate it), hence our expectations for a more rapid downsizing next week, with the bond buying program wrapping up in February. We also expect them to show the prospect of two rate hikes on their dot chart, above the only hike they have currently projected, “commented ING analysts.
Before the end of the week, USD / JPY is near the 113.30 support area. A consistent break to the downside could lead to further losses. The following bracket is seen in 113.05 and then in 112.70. On the upside, 113.55 is immediate resistance followed by the 113.80 zone.
Technical levels
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