USD/JPY rises towards 135.00 after US CPI boosted by US Treasury yields.

• US dollar gains momentum after US inflation figures.
• US CPI rises in February in line with expectations.
• USD/JPY rose 250 points from Monday’s low, with an eye on 135.00.

The pair USD/JPY it broke the range after the beginning of the American session and after the publication of the US CPI figures. The pair is trading above 134.70, at daily highs, as the US dollar strengthens. The dollar gains momentum, without surprises in the consumer inflation report

The February US Consumer Price Index rose 0.4% in February, as expected, while the annual rate slowed to 6% from 6.4%. Core CPI advanced 0.5%, slightly above the 0.4% market consensus.

In the immediate aftermath of the report, the dollar was relatively quiet. However, the dollar gained momentum later as US yields moved higher. US Treasury yields are erasing most of Monday’s gains. The rebound in yields is supporting USD/JPY.

“Inflation has peaked, but that’s not news anymore. The point is that the price rise is not falling, it’s becoming rigid. Furthermore, the yearly inflation top remains in jeopardy if core CPI exceeds 0.3%,” explains Yohay Elam, an analyst at FXStreet. Just a week ago, the question on the Fed was whether it would raise rates 25 or 50 basis points. It is now unchanged or 25 bp. Based on the market response so far to the CPI, there is still a chance of a rise. On Wednesday the Producer Price Index will be published. Retail Sales figures will also be published.

USD/JPY is erasing Monday’s losses and is approaching the 20-day moving average (135.40). Intraday outlook is bullish, although the overall picture offers mixed signals. If the bullish move extends above 135.60, it could gain more momentum. Conversely, a drop below 133.50 would uncover Monday’s three-week low of 132.26.

technical levels