USD/JPY Gets Talked-Down after the US CPI-Fueled Surge

  • USDJPY
    (${instrument.percentChange}%)

USD/JPY Analysis

Yesterday's US CPI report crashed hopes of peak inflation in the United States, as the core reading jumped 6.3% in August and the highest level since March, whereas the headline eased but was higher than expected.

This puts pressure on the Fed for another outsized rate hike in the upcoming meeting next week, with CME's Fed Watch Tool seeing a 34% possibility of a 100 basis points increase, although the highest probability is still assigned to a 0.75% move. [1]

The release and the ensuing upgraded market expectations sent the greenback higher on Tuesday, although USD/JPY narrowly missed fresh 24-year highs.

Japanese officials have recently tried to prop the battered Yen with their commentary, but have not seemed willing to take action. Today though we saw an escalation in rhetoric, as according to Reuters, Finance Minister Suzuki opened the door to a currency intervention if weakness persists. [2]

Furthermore, Nikkei reported that according to sources, the Bank of Japan conducted a foreign exchange "check", that could be a precursor to an intervention. [3]

Given the above factors, caution is needed and USD/JPY may be nearing a tipping point. The uptrend is intact and bulls can still push it to new 24-year highs, although taking out 147.90 does not seem easy at this stage.

On the other hand, their failure to do so yesterday, along with today's slide and the potential of a currency intervention, may lead to further correction. USD/JPY is vulnerable to 141.55-49 which is the 23.6% Fibonacci of the August low/September high rise and the neckline of a potential double-top formation. Daily closes below this level could send the pair to the 139.41-138.70 region.

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 14 Sep 2022 https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html#

2

Retrieved 14 Sep 2022 https://www.reuters.com/markets/europe/dollar-pushes-towards-fresh-24-year-peak-versus-yen-after-us-cpi-shock-2022-09-14/

3

Retrieved 25 Sep 2022 https://asia.nikkei.com/Business/Markets/Currencies/Bank-of-Japan-conducts-check-on-foreign-exchange-rates

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