US Dollar Analysis: USD/JPY Tests 30+ Year Highs Ahead of US CPI
CPI and US Dollar Key Points
- Traders and economists expect headline CPI to decelerate to 0.1% m/m (3.3% y/y). The “Core” CPI figure is expected to print unchanged at 0.3% m/m (4.1% y/y).
- With the decline in the inflation rate seemingly stalling, a higher-than-expected inflation reading is likely to be more impactful to markets.
- If USD/JPY can break conclusively above 152.00, it could clear the way for a bullish continuation toward as high as 155.00.
When is the US CPI Report?
The October US CPI report is scheduled for release on Tuesday November 14 at 8:30am ET.
US CPI Report Expectations
Traders and economists expect headline CPI to decelerate to 0.1% m/m (3.3% y/y). The “Core” CPI figure is expected to print unchanged at 0.3% m/m (4.1% y/y).
US CPI Report Preview
While the average American can hardly set foot outside their front door without hearing about the scourge of high inflation, the official data shows that the year-over-year inflation rate has been more than cut in half over the last year.
That said, for forward-looking policymakers and traders, the reason for concern is that the moderation in price pressures seems to be slowing, if not stopping altogether. As the chart below shows, the so-called “Core” CPI, which excludes more volatile food and energy prices, is poised to print its 3rd straight month of 0.3% growth:
Source: BLS, Bloomberg
After the FOMC meeting earlier this month, most traders believe that the US central bank is done raising interest rates for this cycle, but in order for Jerome Powell and Company to wave the “all clear” flag, they’ll want to see the month-over-month Core CPI reading consistently printing in the 0.1-0.2% range, equivalent to the Fed’s 2% target.
With traders pricing in below 1-in-4 odds of another Fed rate hike this cycle, a higher-than-expected inflation reading is likely to be more impactful to markets. While one hot reading alone is unlikely to push the Fed toward hiking rates in December or January, it keeps that possibility on the table, especially if other economic data shows sisngs of accelerating.
US Dollar Technical Analysis – USD/JPY Daily Chart
Source: TradingView, StoneX
Despite the broader US dollar rally stalling over the past month or two, USD/JPY has continued to grind higher on yen weakness. Notably, the pair bumped up to test last year’s 30+ year high near 152.00 earlier today, and the Bank of Japan has yet to intervene, even verbally, to stem the island currency’s ongoing weakness.
From a purely technical perspective, USD/JPY remains in a well-defined uptrend, with the 14-day RSI holding in a steady bullish range between 50 and 65. A clear break above resistance at 152.00, without any attempt to stop it from the BOJ, could clear the way for a bullish continuation toward as high as 155.00. At this point, only a break below the 50-day EMA around 149.00 would mark an end to the uptrend.
-- Written by Matt Weller, Global Head of Research
Follow Matt on Twitter: @MWellerFX
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.
ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.
City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.
The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.
The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.
The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.
StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.
This advertisement has not been reviewed by the Monetary Authority of Singapore.
© City Index 2024