USD/JPY RALLIES FURTHER BEYOND 116.00 MARK, EYEING 2021 HIGH POST-US CPI

10 February 2022, 16:04

• USD/JPY rallied hard and shot to over one-month high during the early North American session.
• Stronger US CPI prints pushed the US bond yields higher and provided a strong lift to the USD.
• Technical buying above the 115.70 region and the 116.00 mark contributed to the momentum.

The USD/JPY pair caught fresh bids during the early North American session and surged past the 116.00 mark, hitting over a one-month high in reaction to stronger US CPI.

Data released by the US Bureau of Labor Statistics reported this Thursday showed that the headline CPI in the US edged higher to 0.6% in January as against 0.5% expected and the previous. Moreover, the yearly rate jumped to a fresh multi-decade high and accelerate to 7.5% during the reported month. This was above consensus estimates pointing to a rise to 7.3% from the 7% recorded at the end of 2021.

Additional details revealed that the core CPI, which excludes food and energy prices, climbed 6.0% from a year ago as against 5.5% in December and 5.9% anticipated. The data lifted market bets for a 50 bps Fed rate hike in March. This, in turn, pushed the yield on the 2-year US government bond, which is more sensitive to rate hike expectations, to the highest level since February 2020, around 1.434%.

Adding to this, the yield on the benchmark 10-year US note shot back closer to the 2.0% threshold, or the highest level since August 2019 touched earlier this week. This prompted aggressive short-covering around the US dollar and provided a strong boost to the USD/JPY pair. The momentum confirmed a bullish breakout through the 115.70 area and took along some trading stops near the 116.00 round figure.

Sustained break through the mentioned hurdle might have already set the stage for additional gains and supports prospects for a move towards testing 2021 high, around the 116.35 region. Some follow-through buying will be seen as a fresh trigger for bullish traders and pave the way for an extension of the recent appreciating move witnessed since the beginning of this month.

EUROPEAN COMMISSION RAISES 2022 INFLATION FORECAST TO 3.5% FROM 2.2%

10 February 2022, 12:14

The European Commission announced on Thursday that it raised the eurozone 2022 inflation forecast to 3.5% from 2.2% in November's forecast, as reported by Reuters. For 2023, the Commission sees inflation at 2.2%, compared to 1.7% in November. 

The publication further showed that the 2022 growth forecast got revised lower to 4% from 4.3%. 

"Multiple headwinds have chilled Europe's economy this winter: the swift spread of Omicron, a further rise in inflation driven by soaring energy prices and persistent supply-chain disruptions," European Economic Commissioner Paolo Gentiloni said, per Reuters. "With these headwinds expected to fade progressively, we project growth to pick up speed again already this spring."

Market reaction

This report doesn't seem to be having a significant impact on the shared currency's performance against its rivals. EUR/USD was last seen trading in the positive territory near mid-1.1400s.

SILVER PRICE ANALYSIS: XAG/USD BULLS HAVE THE UPPER HAND ABOVE 100-DAY SMA

10 February 2022, 12:35

• Silver edged higher for the fifth straight day and climbed to a two-week high on Thursday.
• The overnight sustained move above the 100-day SMA supports prospects for further gains.
• Bulls might now aim to reclaim the $24.00 mark and test the YTD high touched in January.

Silver traded with a mild positive bias through the first half of the European session and was last seen hovering near a two-week high, around the $23.35 region. The uptick, however, lacked bullish conviction as traders now seemed to wait for the release of the US CPI report, due later during the early North American session.

From a technical perspective, the overnight sustained strength above the 100-day SMA could be seen as a fresh trigger for the XAG/USD bulls. Some follow-through buying beyond the $23.40-$23.45 resistance would reaffirm the positive bias and set the stage for an extension of the appreciating move witnessed over the past one week or so.

The positive outlook is reinforced by the fact that technical indicators on the daily chart have just started moving into bullish territory. Hence, a subsequent strength towards reclaiming the $24.00 round-figure mark, en-route the YTD high around the $24.70 area touched on January 20, remains a distinct possibility.

On the flip side, the 100-day SMA resistance breakpoint, around the $23.20-$23.15 region, now seems to protect the immediate downside ahead of the $23.00 mark. A convincing break below would expose the $22.75 support area before the XAG/USD drops to mid-$22.00, which if broken decisively will negate any near-term positive bias.

The XAG/USD would then turn vulnerable and accelerate the slide towards the next relevant support is near the $22.00 mark. Some follow-through selling will shift the bias in favour of bearish traders and pave the way for a slide towards challenging the double-bottom support, around the $21.40 region.

EUR/USD HOLDS ONTO DAILY GAINS, LOOKING AT 1.1450

9 February 2022, 18:43

• EUR/USD manages to remain above 1.1400, with a modest bullish bias.
• US dollar weaker amid a retreat in yields and risk appetite.

The EUR/USD is moving sideways between 1.1425 and 1.1445 on Wednesday with a bullish bias, on the back of a weaker greenback across the board and amid tightening expectations from the European Central Bank.  

DXY and yields down, stock up

The US Dollar Index (DXY) is falling 0.20% on Wednesday affected by the decline in US yields that moved away of multi-month highs. The US 10-year stands at 1.92% and the 30-year at 2.22%. Also higher equity prices weigh on the dollar. In Wall Street the Dow Jones again 0.82% and the Nasdaq 1.53%.

Market participants await Thursday US CPI reading. The index is expected to have climbed in January to 7.3% (annual rate).  The numbers will likely influence on market expectations about the Federal Reserve’s policy.

The EUR/USD is up more than 150 pips from the level it had a week ago on the back of a change in tightening expectation from the ECB. The rally found resistance at the January top at 1.1480/85. The mentioned area continues to be a key level that if broken would clear the way for 1.1500 and more.

In the very short-term while above 1.1425, the intraday bullish bias is likely to remain in place. A slide below would expose again 1.1400. The next support below stands at 1.1370/80, the last defense to the current positive short-term outlook for the euro.

USD/JPY PRICE ANALYSIS: RETREATS FROM WEEKLY-TOPS TO 115.40S AMID A LIGHT CALENDAR

9 February 2022, 19:05

• Broad US dollar weakness across the board weighed on the USD/JPY pair.
• Falling US Treasury yields and demand for riskier assets keep the USD/JPY subdued.
• USD/JPY Technical Outlook: Remains upward biased ahead of the US CPI for January.

On Wednesday, the USD/JPY retreats from weekly highs ahead of the release of US inflation figures, alongside the slip of US Treasury yields. At the time of writing, the USD/JPY is trading at 115.44, down 0.08%.

Financial markets mood is positive, as shown by European and US equity indices printing gains. The US 10-year Treasury yield is dipping three basis points, to sit at 1.925%, while the US Dollar Index drops 0.20%, currently at 95.44.

USD/JPY Price Forecast: Technical outlook

In the overnight session for North American traders, the pair reached a daily high at 115.68, followed by a drop to the downslope one-month-old resistance/support trendline that passes around the 115.25-35 area. Even though the USD/JPY retreated to the abovementioned trendline, the pair remained above it, confirming the upward bias. 

That said, the USD/JPY first resistance would be 116.00. Breach of the latter could pave the way for further gains and expose a 24-year-old downslope trendline drawn from August 1998, swing highs that pass around 117.00. An upward break would expose the January 2017 swing high at 118.61.