USD/JPY suffers losses as markets digest US CPI

• USD/JPY is cruising around the 145.55 level, with losses of 0.40%.
• The US CPI registered 3.1% annually in November, while the underlying measure stood at 4%, matching expectations.
• US bond yields fall ahead of Fed decision on Wednesday.

In the Tuesday session, USD/JPY faces a downward movement, and is now trading at the 145.55 level. This move comes as market participants digest the implications of US Consumer Price Index (CPI) data, which confirmed another monthly slowdown.

In this sense, inflation in the United States, as indicated by the Consumer Price Index (CPI), decreased in November as expected. He CPI experienced a monthly increase of 0.1%, and the annual inflation rate fell from 3.2% in October to 3.1% in November. For its part, the annual core inflation rate, which excludes volatile elements, remained unchanged at 4%. These figures reveal a slowdown in inflationary pressures in the US economy, which could influence future monetary decisions by the Federal Reserve (Fed).

That said, the Fed will make its decision on interest rates in Wednesday’s session. The Dollar seems to remain weak, since the decline in inflation makes the markets bet on a less aggressive approach by the banks for the next decision. The consensus is that the Fed will keep rates steady at 5.5%, but attention will focus on economic and interest rate projections for clues as to when the bank will begin its easing cycle. It is worth noting that bank officials have recently stated that they are still relying on data and have hinted that they need to see more signs that the economy is cooling before they can start cutting rates.

Meanwhile, US bond yields are falling. The 2-year rate is 4.72%, and the 5-year rate is 4.22%. The 10-year yield maintains a similar rate of 4.23%.

USD/JPY levels

The daily graphic indicators reflect a change towards a neutral to bullish trend for the pair. The Relative Strength Index (RSI) is on a flat slope, but still in negative territory, pointing to the waning strength of the buying momentum. The Moving Average Divergence (MACD), which prints flat green bars, provides further support to a stalled bullish momentum.

However, it is worth considering that the pair’s positioning relative to its simple moving averages (SMA) paints a more nuanced picture. The pair is trading above the 200-day SMA, but remains below the 100-day and 20-day SMA. This indicates that despite the recent selling momentum, the long-term trend remains largely in favor of buyers.

Support Levels: 145.00, 144.50, 144.00.
Resistance Levels: 145.70, 146.00, 146.50.

USD/JPY daily chart