USD/JPY trades near 159.00 as stronger-than-expected US inflation data fuels expectations for a 50 bps Fed rate hike in December, keeping the pair in a bullish trend above the 158.10 support level.
October US CPI surprised to the upside (0.4% m/m headline vs 0.3% consensus, 0.3% core vs 0.2%), reviving expectations of a bigger 50 bps Fed hike in December and supporting the Dollar, with DXY up 0.1% near 102.32. The direction depends on the Fed actually delivering a larger hike.
US CPI beat at 0.4% m/m headline and 0.3% core has markets pricing a 50 bps Fed hike in December, lifting the Dollar and pushing the pair near its almost seven-week high around 159.00, with bullish momentum above the 20-day EMA at 158.10. A decisive break above 159.00 would open 160.00 and the 160.39 September high.
The Yen trades weakly against a Dollar strengthened by hot US inflation and expectations of a bigger Fed hike, with the pair near an almost seven-week high around 159.00. Thursday's Japan PPI (forecast +0.3% m/m) is the next domestic data point but is unlikely to change the divergence story.
The USD/JPY pair is testing a seven-week consolidation high near 159.00 as markets price in a 50 bps Fed rate hike for December. This shift follows a hotter-than-expected October US CPI print, which showed headline inflation at 0.4% and core at 0.3%. With the pair trading above its 20-day EMA at 158.10, bullish momentum remains intact as investors await Japan's October PPI data due Thursday.
US inflation for October came in above forecasts, leading markets to price in a possible 50 basis point Fed rate hike in December, which supports the Dollar.
The Dollar strengthened after US October inflation came in hotter than expected, leading markets to price a possible 50 basis point Fed hike in December, while the Yen traded weakly.
A decisive break above 159.00 would signal a fresh upside leg, with resistance at 160.00 and the September high at 160.39. Support sits at the 20-day EMA at 158.10 and then near 156.00.
Because expectations of a larger Fed rate hike in December are boosting the Dollar after stronger-than-expected US inflation, while the Yen is trading weakly against it.