USD/JPY is gaining as slightly higher-than-forecast U.S. CPI nL1N2080JB lifts U.S. yields, raising doubts about the more dovish Fed scenarios and putting barriers at 111 into play before retail sales Thursday and the conclusion of this week's U.S.-China trade talks Friday.
Expectations that the U.S. will push back the March 2 tariff-increase deadline nL1N2070SM, reduced risk of another U.S. government shutdown and lingering hopes of a Brexit delay have improved risk sentiment this week, taking a toll on the haven yen.
Today's N225 surge above this year's highs, October's swing low, the daily cloud top and 55-DMA is reinforcing the risk-on, USD/JPY-bullish, 200-DMA clearance by the S&Ps yesterday.
The pricing back out of any Fed cuts this year and bounce in 2-year Treasury yields above the 2.5 percent Fed funds rate following the CPI report may detract from the risk-on USD/JPY if Fed tightening expectations eventually revive enough to threaten yield curve inversion and fresh financial market stress.
But for now, good U.S. economic data and trade war news nL1N2030UB should keep USD/JPY on track to test its 200-DMA nL1N2060K7 at 111.29, and perhaps the 100-DMA at 111.68 now that the 55-DMA trend-following hurdle has been cleared.
See also nLLADDEFIJ.