August 11, 2022 12:54 AM ET
By: AnalysisWatch
The USD/JPY pair extended its recovery and managed to stay above the critical 135.00 hurdle in the Asian trading session. The asset has strengthened its pullback movement after falling near 130.00 on Wednesday. Further development is likely to remain critical as further upside would require sufficient strength from the dollar bulls.
The assets moved in a negative direction after the US Consumer Price Index (CPI) fell to 8.5% from 9.1%.
Market participants were encouraged by signs of easing price pressures that had the Federal Reserve (Fed) worried, while the U.S. Dollar Index (DXY) was heavily pressured by market participants.
Undoubtedly, a lower U.S. inflation release cooled volatility in the global market and reduced the likelihood of a very restrictive stance by the Federal Reserve (Fed). However, the likelihood of a rate hike remains intact, as the path to achieving 2% inflation is far from over. As a result, the U.S. dollar index (DXY) continued to rally in Asian trading after retreating from a six-week low of 104.64.
In Tokyo, the ongoing cabinet reshuffle is expected to lead to a dramatic change in the Japanese yen's situation more broadly. Japan's Finance Minister, Shunichi Suzuki, said that Japan's financial situation is still serious. He added, "It is important to continue to respond to COVID and inflation."
The U.S. Michigan Consumer Sentiment Index (CSI) will be in the spotlight for the remainder of the week.
Sentiment data is expected to improve to 52.2 from a previous reading of 51.5. This could strengthen the USD as higher consumer confidence in the US economy will boost aggregate demand.
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