- USD/JPY has pulled back sharply from the four-week highs reached this Wednesday.
- Widespread USD weakness, inspired by US CPI, is putting pressure.
- Risk appetite and dovish outlook from the Bank of Japan weaken and support the yen.
The pair USD/JPY It is under strong selling pressure during the North American session and has retreated further from the four-week high reached this Wednesday. The pair hits a new daily low in reaction to the US consumer inflation numbers, and currently trades around 133.00, losing almost 0.50% on the day.
The US dollar (USD) is weakening across the board and is nearing a two-month low hit last week after the US CPI release, which, in turn, puts downward pressure on the USD/USD pair. JPY. In fact, the US Bureau of Labor Statistics reported that the headline CPI rose 0.1% in March, up from 0.4% the previous month and 0.3% expected.
Furthermore, the annual rate slowed from 6% in February to 5.0% during the reporting month and largely dwarfed core CPI, which excludes food and energy prices. However, the data reinforces market expectations that the Federal Reserve (Fed) is nearing the end of its rate hike cycle, triggering a sharp decline in US Treasury yields and weighing on the dollar. .
That being said, a combination of factors could weaken the Japanese yen (JPY) and limit losses for the USD/JPY pair, at least for now. Prospects of an imminent pause in the Fed’s rate hike boost investor confidence, evidenced by the sharp rally in US stock futures. On the other hand, the dovish near-term outlook from the Bank of Japan (BOJ) should be a factor against the yen.
Traders may also refrain from making aggressive bets, preferring to stay out ahead of the FOMC meeting minutes, which are due to be released later in the US session. The Fed minutes will provide insight into how policy makers assessed the need to raise rates despite turmoil in the banking sector. This should help investors determine the short-term trajectory of the dollar.
The aforementioned mixed fundamental background makes it prudent to wait for strong follow-up selling before confirming that the USD/JPY week-long uptrend has run its course.
Technical levels to watch
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
