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  • USD/JPY gained traction in the early American session.
  • 10-year US Treasury bond yield is up nearly 2% on Wednesday.
  • Annual CPI in US rose to 4.2% in April.

The USD/JPY pair advanced to a fresh daily high of 109.21 with the initial reaction to the US inflation data. As of writing, the pair was up 0.4% on the day at 109.04.

Rising US T-bond yields support USD/JPY

The US Bureau of Labor Statistics’ monthly report revealed on Monday that annual inflation, as measured by the Consumer Price Index (CPI), rose to 4.2% in April from 1.6%. With this reading surpassing analysts’ estimate of 2.6% by a wide margin, the 10-year US Treasury bond yield surged higher and was last seen gaining 1.7% on the day at 1.652.

In the meantime, the US Dollar Index (DXY), which jumped above 90.60 after the CPI report, lost its traction and erased a large portion of its gains. At the moment, the DXY is up 0.1% on the day at 90.25, limiting USD/JPY’s upside for the time being.

Commenting on the inflation data,    Federal Reserve’s Vice Chairman Richard Clarida argued that inflation will continue to rise before moderating toward the end of the year.

Investors are now waiting for Wall Street’s opening bell. A sharp decline in US stocks could help the USD regather strength and allow USD/JPY to push higher in the second half of the day.

Technical levels to watch for

 

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