USDJPY stays firmer past 140.00 despite strong Japan inflation as US Treasury yields bounce off six-week low

• USDJPY prints three-day uptrend, braces for the first weekly gain in five.
• Japan’s National CPI ex-Food rose the fastest since 1982.
• US 10-year Treasury yields rebound from six-week low on hawkish Fedspeak.
• Dicey markets, the light calendar can restrict the Yen pair’s moves as bulls flex muscles.

USDJPY remains on the way to snapping a five-week downtrend as it defends the latest rebound near 140.40 during the initial hour of Tokyo trading on Friday. In doing so, the Yen pair fails to respect the solid inflation data from Japan amid upbeat US Treasury yields.

Japan’s headlines National Consumer Price Index (CPI) grew 3.7% YoY versus 2.7% expected and 3.0% prior. More importantly, the National CPI ex-Fresh Food, mostly known as the Core CPI, rose at the highest pace since 1982.

It should be noted that multiple representatives from the Bank of Japan (BOJ), including Governor Haruhiko Kuroda, have recently defended the Japanese central bank’s easy-money policy and hence the USDJPY buyers might have paid little heed to the inflation data.

Elsewhere, the 10-year Treasury yields bounced off a six-week low on hawkish Fedspeak and firmer prints of the top-tier data while mostly ignoring the mixed prints of the second-tier details.

On Thursday, US Philadelphia Fed Manufacturing Index fell to -19.4 versus -6.2 market forecasts and -8.7 prior. Further, Housing Starts declined by 4.2% MoM in October following September's 1.3% contraction whereas Building Permits fell by 2.4%, compared to a 1.4% increase recorded in the previous month. Additionally, the Jobless Claims eased to 222K for the week ended on November 11 versus 225K expected and upwardly revised 226K prior.

Even so, strong prints of the US Retail Sales and Producer Price Index (PPI) for October seemed to favor the Fed hawks. That said, St. Louis Federal Reserve President James Bullard said on Thursday that the US Federal Reserve's (Fed) monetary policy is not yet in a range estimated to be sufficiently restrictive to reduce inflation. On the same line were the latest comments from Minneapolis Federal Reserve Bank President Neel Kashkari. “With inflation still high but a lot of monetary policy tightening already in the pipeline, it's unclear how high the US central bank will need to raise its policy rate,” said Fed’s Kashkari.

Additionally, fresh tension between Russia and Ukraine due to missile strikes on Poland, as well as the increasing Covid counts in China also underpin the US Dollar’s safe-haven demand and propel the USDJPY pair.

Looking forward, a lack of major data/events could challenge the momentum traders but the risk aversion and firmer yields can favor the USDJPY bulls.

Technical analysis

Despite the latest rebound, the USDJPY pair needs to provide a clear upside break of the 100-DMA, around 141.00 by the press time, to convince the bulls.