- USD/JPY is back below 139.00 after reaching a new high since 1998.
- The US PPI shows that inflation remains the main concern.
- The dollar falls in American time, although it continues to rise on the day in general.
Despite risk aversion, the USD/JPY rises over a hundred pips on Thursday. The monetary policy divergence between the Bank of Japan and the Federal Reserve keeps the pair in demand. After reaching a new high at 139.38, it fell back to 138.80.
Inflation data justify the divergence of monetary policy
The US consumer price index rose 9.1% (yearly) in June, reaching the highest since 1981. The producer price index rose 11.3%. Both figures beat expectations and showed no slowdown. With inflation higher than expected, the Federal Reserve (Fed) is seen to hike rates aggressively. A rate hike of 100 basis points at the next meeting is now not a distant possibility.
At the same time, the Bank of Japan continues its ultra-loose monetary policy. The divergence between the Bank of Japan and the Federal Reserve remains the main fuel for the rise in USD/JPY.
Not even risk aversion is helping the yen. On Thursday, the Dow Jones falls 1.09% (to a one-month low) and US yields are flat. Still, the Japanese yen is one of the worst performers and USD/JPY is up over a hundred pips.
If the pair breaks above 139.00 again, it seems likely that the top will be tested. Above 139.40, the next resistance could come at 139.70. Next, attention would turn to the psychological zone of 140.00. On the other hand, a consolidation below 138.80 could trigger a correction. Next support could be at 138.15, followed by a stronger area at 137.70.
Technical levels
Source: Fx Street
With 6 years of experience, I bring to the table captivating and informative writing in the world news category. My expertise covers a range of industries, including tourism, technology, forex and stocks. From brief social media posts to in-depth articles, I am dedicated to creating compelling content for various platforms.
