USD/JPY – U.S. Inflation Hits 30-Year High

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 NOV 11, 2021

• Consumer prices in the U.S. highest in three decades
• Earlier rate hike expected from the Fed
• USD/JPY trading at 4.5-year high

Chart 1: USD/JPY D1 chart

The U.S. Bureau of Labor Statistics (BLS) reported a strong rise in consumer prices yesterday, surpassing all forecasts. Annual headline inflation rose by 6.2%, its highest level in 31 years while annual core inflation hit 4.6%, a 30-year high level. The main driver of inflation in October was energy prices which is not surprising as the U.S. starts heading into winter. With the strong inflation, the market is beginning to price in more interest rate hikes by the Federal Reserve at an earlier timeline. As a result, the U.S. dollar strengthened across the board.

Recently, USD/JPY has been trading around the 4.5-year high level of 114. Attempts to breach above this level were to no avail. With the optimistic view that the Fed may be hiking rates earlier than previously projected, USD/JPY may break above 114, providing a strong upside.

Trade Setup for USD/JPY (H4)

Buy Stop at 114.80

Upcoming news that may impact price movement of AUD/JPY

12 November – U.S. Preliminary UoM Consumer Sentiment data release at 2300 (GMT+8)

13 November – FOMC Member Williams speaking at 0110 (GMT+8)

16 November – U.S. Retail Sales m/m data release at 2130 (GMT+8)

17 November – FOMC Member Barkin speaking at 0100 (GMT+8)

17 November – FOMC Member Bostic speaking at 0100 (GMT+8)

17 November – FOMC Member Daly speaking at 0430 (GMT+8)

18 November – FOMC Member Daly speaking at 0140 (GMT+8)

18 November – FOMC Member Evans speaking at 0505 (GMT+8)