Is yesterday's softer US CPI data a turning point for the pair and for the dollar? Well, it too early to state it as such but the dollar has been showing some vulnerabilities already going into yesterday's main event.
USD/JPY has been caught up in and around the 145 to 150 range and the break below the lower end of that yesterday sparked a quick decline towards the 100-day moving average (red line). It's a heavy repricing of market sentiment, especially in bonds, in case that the inflation trend could spark a less aggressive Fed moving forward.
For now, one reading doesn't make a trend but this is a market that is desperate for just about anything it can lay its hands on. That little bit of hope is enough and the rally in stocks yesterday exemplifies the kind of bias we are dealing with at the moment.
After having been accustomed to a more aggressive Fed for months on end, broader markets now can finally look to find some relief. There will come a time when investors and traders have to debate between an inflation peak or plateau but for now, it is all about taking in the notion that price pressures may not get much worse from here.
Going back to USD/JPY, it's all about the pressure on the 100-day moving average at 140.77 at the moment. If sellers can break through that, the 140.00 mark comes into play next and that will be an especially crucial level to watch. If buyers are unable to hold the line there, we can easily see a much deeper correction back towards the 200-day moving average (blue line), seen at 132.73 currently, in a quick move.