USD/JPY HITS FRESH LOWS UNDER 139.00 AFTER US INFLATION DATA

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  • The US dollar tumbled across the board after the release of US CPI.
  • Annual US inflation eased to 4% in May, which is the lowest since March 2021.
  • USD/JPY is under pressure and testing the 139.00 level.

The USD/JPY dropped sharply following the release of US inflation data, reaching a low of around 139.00 and remaining under pressure ahead of Wall Street's opening bell. 

The US Consumer Price Index (CPI) rose 0.1% in May, which was below the expected increase of 0.2%. The annual CPI rate fell from 4.9% to 4.0%, reaching the lowest level since March 2021. The Core CPI advanced 0.4%, in line with expectations, and the YoY rate slowed from 5.5% in April to 5.3% in May.

These numbers leave the door wide open for the Federal Reserve (Fed) to skip a rate hike on Wednesday. The FOMC will announce its decision tomorrow and is expected to keep the target interest rate range at 5.00-5.25%. After the inflation figures, US bond yields tumbled and boosted the Japanese Yen. Equity prices on Wall Street rose, and futures point to a positive opening.

The USD/JPY is currently testing the 139.00 area and remains in a recent familiar range, with risks tilted to the downside for the moment. Volatility is set to remain elevated ahead of the Fed's decision and as markets digest the latest inflation figures. 

A clear break under 139.00 in USD/JPY would signal further losses, with the first target at the June low of 138.40. On the upside, resistance is seen at 139.75 and then 140.00. Consolidation above 140.00 could lead to an acceleration to the upside


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