USD/JPY meets fresh supply, breaches 107.00 ahead of US CPI
- China Xi’s speech led risk-on peters out, Yen regains footing.
- US CPI and FOMC minutes in focus for fresh direction.
The USD/JPY pair came under renewed selling pressure in the European session, as the Yen got bumped up into the negative sentiment around the European equities.
The Chinese President Xi’s pro-globalization stance led risk-on sentiment faded on rising geopolitical tensions surrounding Syria while attention shifts towards the US inflation figures, with a soft print likely to weigh negatively on the US interest rates outlook.
Aside from risk-off flows, the Yen also finds some support from an upside surprise seen in the Japanese core machinery orders data released earlier today. Japan Machinery Orders (MoM) came in at 2.1%, above expectations (-2.5%) in February
“Today’s eco calendar contains US inflation data and FOMC Minutes. Headline inflation is expected to print at 0% M/M and 2.4% Y/Y while core inflation is forecast to accelerate to 0.2% M/M and 2.1% Y/Y. Yesterday’s higher US PPI readings left markets unnerved, but we don’t think that such pattern will last for long. Higher US inflation readings will eventually boost chances of an additional Fed rate hike this year. FOMC Minutes could be more hawkish than recent speeches by Fed governors as they probably won’t attach much weight to the trade dispute,” KBC Market Research Desk notes.
USD/JPY levels to watch
According to Omkar Godbole, Analysts at FXStreet, “the 5, 10 and 21 MA is biased bullish. The MACD has turned positive and the RSI is holding above 50.00 (into bullish territory). So, the spot could attack rising wedge hurdle seen at 107.91 (Feb 21 high + rising wedge hurdle). The pair could rise to 109.33 (descending 21-week MA) if the spot closes above 107.9 in a convincing manner. Meanwhile, a downside break of the rising wedge would signal the corrective rally has ended. In such a scenario, the pair will likely target the recent low of 104.63.”