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May 09 - 01:55 PM

USD/JPY - COMMENT-A Lot On The Line For USD/JPY Longs, Fed As US CPI Looms

By Randolph Donney  —  May 09 - 12:35 PM

USD/JPY is flirting with sell signals after it eked out a new 20-year high Monday, then fell with Treasury yields that neared their 2018 prior cycle highs ahead of Wednesday's U.S. CPI report, forecast to retreat from 8.5% to 8.1% year-on-year.

USD/JPY's quick retreat from Monday's 131.35 marginal new trend highs on EBS raises some red flags, because it would only take a close below Friday's 130.10 low to mark the first daily sell signal since March 4.
And massively expanded weekly Bolli bands have bearishly tightened for the first time since early March.

A close below 130 would raise the risk of last week's 128.62 lows being probed.
As that is now the weekly on-close pivot point, a close Friday below it would open a door to supports by 127 next.

Prices surged a spectacular 14.5% from March's lows as the bullish divergence between Fed tightening pricing and ultra-loose BOJ policy compelled long carry traders, with specs heavily long.

But today, peak Fed rate hike expectations eroded due to growing financial market anxiety that issues from winding down of pandemic driven monetary and fiscal stimulus amid rampant inflation, crushing Chinese COVID lockdowns and geopolitical instability.
Thus, to-date Fed hike pricing may suffice.

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Refinitiv IFR Research/Market Commentary


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