USD/JPY hits nearly 34-year peak amid surging US inflation and Treasury yields

■USD/JPY ascends following a US inflation report indicating reacceleration, challenging levels that might prompt intervention.

■Rising inflation figures push Treasury yields higher and boost the US Dollar.

■Market anticipates future Fed actions with keen interest in upcoming monetary policy minutes.

The USD/JPY rallied to an almost 34-year high after a hotter-than-expected inflation report in the United States (US) sent US Treasury yields soaring. Consequently, the major climbed past the 152.00 figure, seen as a level that could trigger intervention, which so-far hasn’t happened. At the time of writing, the pair trades at 152.70, gains 0.90%.

The pair advances to 152.70, as US CPI data prompts a sharp yield increase, fueling speculation about Fed's rate path–

US economic data revealed by the Bureau of Labor Statistics (BLS) showed that inflation is reaccelerating. The Consumer Price Index (CPI) rose by 0.4% MoM and 3.5% on the yearly figure, exceeding estimates, with the latter also the previous reading. Underlying CPI, which excludes volatile items like food and energy, was above projections but remained unchanged compared to February’s data at 0.4% MoM and 3.8% YoY.

That triggered a reaction in the financial markets, as US Treasury bond yields skyrocketed, with the short end of the curve, namely the 2-year T-note, climbing 20 basis points. Consequently, the Greenback refreshed the year-to-date (YTD) highs of 105.10 yet retreated somewhat, as shown by the US Dollar Index (DXY). The DXY is up 0.81%, at 104.95.

Following the inflation report, the Chicago Board of Trade (CBOT) Fed funds futures estimate just two rate cuts by December 2024, with speculators projecting interest rates to end at around 4.97%.

The USD/JPY rose sharply and hit a multi-year high of 152.73, a level last seen in June 1990, ignoring intervention threats by Japanese authorities that include Finance Minister Shunichi Suzuki, who said that he was watching the market with a high sense of urgency and wouldn’t rule out any steps to address excessive moves.

Ahead in the calendar, market players are eyeing the latest Federal Reserve monetary policy minutes' release.

USD/JPY Price Analysis: Technical outlook

From a technical standpoint, the USD/JPY is trading at levels that were seen in the 1990s. With the major extending its gains past 152.00, that exposes as the next resistance level, the June 1990 highest peak at 155.78, followed by the 1990’s high at 160.32. On the flip side, the first support would be the psychological 152.00 level, followed by the Tenkan-Sen at 151.77 and the April 5 low of 150.81.