In a few hours, we’ll see Uncle Sam’s January inflation numbers.
Will the release propel the dollar to multi-month highs against the yen?
Before moving on, ICYMI, yesterday’s watchlist checked out AUD/USD’s key resistance area after a pick up in risk-taking. Be sure to check out if it’s still a valid trade!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
Fed’s Mester: “Each meeting is going to be in play”
Fed’s Bostic sees three interest rate hikes in 2022, leaning towards four
EIA: U.S. crude stockpiles drop unexpectedly, demand hits record high
RICS: A net balance of +74 of its members reported house price increases in Jan, up from +70 in Dec
Japan’s producer prices up by 8.6% y/y, the 11th straight month of producer price increases
Ford, Toyota halt some output amid Canadian trucker protests
Stock rally loses steam in Asia as U.S. inflation test looms
Upcoming Potential Catalysts on the Forex Economic Calendar:
BOE Gov. Bailey to give a speech at 9:05 am GMT
EU’s economic forecasts at 10:00 am GMT
U.S. CPI report at 1:30 pm GMT
U.S. initial jobless claims at 1:30 pm GMT
Fed’s budget balance numbers at 7:00 pm GMT
RBA Gov Lowe to give at a virtual hearing at 10:30 pm GMT
Japan’s markets will be out on a bank holiday (Feb 11)
NZ quarterly inflation expectations at 2:00 am GMT (Feb 11)
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️
What to Watch: USD/JPY
USD/JPY is trading just under the 116.00 level that has served as resistance at least three times since late November.
Will we see USD/JPY trade to multi-month highs today? In a few hours, Uncle Sam’s will print its January CPI figures.
Markets see monthly consumer price increases steadying from last month though annualized CPI may outpace even last month’s 7.0% growth.
Faster-than-expected price increases, printed less than a week after the strong NFP report, may spur the Fed to speed up its tapering/tightening schedule.
USD could gain pips against its fellow safe-haven and jump up to the 117.00 zone near the top of the 4-hour chart’s ascending channel.
I’m not ruling out a buy-the-rumor, sell-the-news situation, however. After all, this is what happened during the release of December’s inflation report when minimal upside surprises resulted in profit-taking that weighed on the dollar.
If traders decide that January’s price increases won’t change the current pace of the Fed’s policy changes, or if a risk-friendly trading environment encourages dollar-selling across the board, then USD/JPY bears could follow the bearish divergence on the chart and drag the dollar closer to the mid-channel support and 100 and 200 SMAs.
