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CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Market update: hot US inflation sparks bullish breakout, forecast on USD/JPY levels

US inflation surges, treasury yields climb, bolstering dollar and propelling USD/JPY beyond 150.00 to a near three-month high.

Source: Bloomberg

After a subdued start to the week, USD/JPY rocketed higher on Tuesday, rallying more than 0.9% and breaking above the psychological 150.00 mark – an explosive move that saw the pair reach its highest level in nearly three months.

USD/JPY & treasury yields performance

Source: TradingView

The US dollar’s strong performance was driven by soaring US Treasury yields following hotter-than-anticipated US inflation data. For context, both headline and core CPI for January surprised on the upside, at 3.9% y-o-y and 3.1% y-o-y, respectively, two-tenths of a percentage point above expectations.

Source: DailyFX

US inflation trend

Source: BLS

Limited progress on disinflation has prompted traders to scale back, easing expectations for the year, as seen in the chart below. The possible start date of the FOMC rate-reduction cycle has also been pushed out, with market pricing now pointing to the first cut occurring at the June meeting.

2024 Fed funds futures – implied rates by month

Source: TradingView

With price pressures showing extreme stickiness, the Fed will be reluctant to start lowering borrowing costs any time soon; in fact, it may even delay its first move until the second half of 2024 to play it safe. This could translate into higher US yields in the near term, a bullish outcome for the US dollar.

USD/JPY technical analysis

USD/JPY soared on Tuesday, clearing resistance at 150.00 and hitting its highest mark since mid-November. Although the pair remains entrenched in a solid uptrend, the exchange rate is approaching levels that could make the Japanese government uncomfortable and inclined to step in to support the yen.

In the event of FX intervention, USD/JPY could take a sharp turn to the downside, reversing part of its recent advance. In this scenario, possible support zones can be identified first at 150.00, followed by 148.90. On further weakness, all eyes will be on 147.40 and 146.00 thereafter.

In the absence of currency intervention or talk of it by Japanese authorities, the bulls are likely to press on before launching an all-out assault on last year’s high around the 152.00 handle. Additional gains from this point onward could draw attention to 152.70.

USD/JPY daily chart

Source: TradingView

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. 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. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.


This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. 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. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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