USD/JPY climbs as US CPI meets expectations

• USD/JPY increases 0.37%, buoyed by November’s CPI data which confirmed analysts' expectations.
• US headline CPI rose slightly, but core figures remained stable, supporting potential Fed rate adjustments.
• Anticipation grows for a possible Fed rate cut, with odds favoring a 25 basis point reduction next week.

The USD/JPY rose some 0.37% early in the North American session as traders digested the release of November US Consumer Price Index (CPI) figures, which came as expected by the consensus. At the time of writing, the pair trades volatile at around 152.50.

USD/JPY pair ascends, responding to inline CPI figures and stable Treasury yields

The US Bureau of Labor Statistics (BLS) revealed that headline CPI was 0.3% MoM, a tenth high, but aligned with estimates of 0.2%. Core CPI was unchanged at 0.3% MoM, which was aligned with projections for October and Wall Street.

In the twelve months to November, CPI was up from 2.6% to 2.7%, while core CPI was unchanged compared to October, as projected by the consensus at 3.3%.

After the data, the USD/JPY resumed to the upside, while the US 10-year Treasury note yield, pared its earlier gains, stands at 4.226% flat.

November’s CPI has increased the chances of the Fed cutting interest rates another 25 basis points (bps), with odds standing at 84%, according to the CME FedWatch Tool.

Source: Prime Market Terminal (PMT)

Michael Brown of Pepperstone says the figures shouldn’t deter the FOMC from a quarter-point cut next Wednesday.

This week, the US economic docket will feature the release of the Producer Price Index (PPI) along with Initial Jobless Claims figures for the week ending December 7.

USD/JPY Price Forecast: Technical outlook

The USD/JPY daily chart suggests that bulls are facing stir resistance at the Kijun-Sen at 152.69, failing to gain traction, which could witness the pair rallying toward the November 20 high of 155.89, ahead of the 156.75 daily peak of November 15. However, the pair has been carving successive series of lower highs and lower lows, and unless bulls clear the Kijun-Sen, sellers could drive prices inside the Ichimoku Cloud.

On further weakness, the USD/JPY could drop below 152.00 and extend its losses toward the 100-day Simple Moving Average (SMA) at 148.65.