The pair was dragged down by a weaker dollar and lower bond yields in trading yesterday, as traders are starting to get a sense that the US CPI data this week may be a softer one. That owes to the decline in the used car price index here, which is one that tracks core inflation quite closely.
But for the case of USD/JPY, it is pretty much just a continuation of the rejection from 145.00 as buyers take some off the top after a strong run from 130.00 since April. I mean, the 145.00 mark itself coincides with potential intervention by Japan so there is reason not to risk losing it all just by overstepping.
The recent dollar softness is also helping to play a role in this, as the greenback is seen slipping against the euro and sterling notably.
Apart from the action yesterday, the latest drop in USD/JPY does run slightly against what we are seeing in the bond market. So, we'll see if that development will continue in the days ahead. But if yields are to stay on the heavier side, that should keep the pair pinned down with sellers now taking a look at the 140.00 mark instead.
As mentioned before, there is a decent area between 140.00 and 145.00 for the pair to roam and we are seeing exactly just that in trading this week. It's now all about waiting on the US CPI data tomorrow.
