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USD/JPY spikes to one month-highs after barrage of US data

US yields advanced notably today, supporting the USD/JPY pair and sending it to one-month highs.

The USD/JPY pair was bid Thursday, as sentiment improved notably and traders bought stocks and carry-trades. At the time of writing, the greenback jumped to 114.50, its highest level since late November.

Full US calendar

Traders paid attention to today’s US durable goods orders data, which surprised to the upside and printed 2.5% in November, up from 0.1% in October. Additionally, the ex transportation gauge rose to 0.8% from 0.3% previously.

However, the value of core capital goods orders, a proxy for business investment in equipment that excludes aircraft and military hardware, dropped 0.1% in November (following an upwardly revised 0.9% increase in October).

Additionally, the US initial jobless claims stayed at 205,000, exactly as expected, while continuing jobless claims fell slightly to 1.859 million from 1.867 million in the previous week.

Furthermore, US personal income ticked lower in November to 0.4% from 0.5%, while personal spending more than halved from 1.4% to 0.8%, leading to a decline in the savings rate to its lowest since December 2017.

Last but not least, the Michigan consumer sentiment index ticked higher to 70.6 in December, pointing to a very modest rebound from post-COVID (and ten-year) lows.

Finally, and perhaps most importantly, The Fed’s favorite inflation indicator – the core PCE deflator – soared in the last month. The headline PCE deflator hit 5.7% YoY, the highest since June 1982.

Dovish Japanese officials

From other news, Bank of Japan Governor Haruhiko Kuroda said that Monetary easing played a crucial role in achieving fairly early economic recovery from the pandemic.

Additionally, he noted that weak yen helps increase export volume, profits Japan firms earn overseas but pressures household income and domestic-oriented firms’ profits.

At the same time, Japanese Prime Minister Fumio Kishida said he hopes the Bank of Japan continues to make efforts to achieve the 2% price goal. While inflation rages elsewhere and the CPI is on its way to double digits in most G7 countries, Japan seems to be the only exception where inflation remained muted.

Technically speaking, the next key resistance is in the 115.20 area, where the current cycle highs are. If the pair jumps above it, we might see a rally toward 120 in the following year. That level has been unseen since early 2016.

On the other hand, the short-term support is seen near 113.85 and if not held, further demand should be expected at November/December lows in the 112.75 area.

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