Title: USD/JPY trips back below 130.00, US CPI report in focus

May 11, 2022 06:19AM ET

By: AnalysisWatch

When it comes to breaking the 130.00 level, the pair has been in a "will it, won't it?" mode since the end of April.

This week's trading is no different, as Monday's rally did not hold and the pair fell back below the April 28 daily resistance at 131.25. This was accompanied by a drop in Treasury yields, with 10-year yields falling from 3.20% to 2.93% currently.

This in turn caused USD/JPY to fall back below 130.00 today, with the short-term chart showing sellers taking control ahead of the release of the US Consumer Price Report:

Ahead of the key risk event, the bond market is responsible for the pair's trading sentiment. The key statement to watch is that of the "inflation peak," and how that plays out will impact yields and the dollar, as described here.

If the markets continued to bet on an "inflation high" after today, the dollar may also have made a short-term high against the yen. Last week's lows around 128.62–75 will be crucial, as a break below that level could lead to a more decisive break lower in USD/JPY if sentiment changes.