USD/JPY Slumps Post US CPI Miss & Possible Intervention, Trendline Support Pierced

Yen comfortably outperformed the rest of the G10 for Thursday's session, up nearly 1.80%, the BBDXY and DXY indices both off around 0.50% each. Broader USD sentiment was softer following the CPI miss (Supercore (services ex-housing) inflation printed negative again, at -0.05% (-0.04% prior), vs +0.27% expected, for the first back-to-back deflations since Aug-Sep 2021). Possible FX intervention also played a role in USD/JPY's sharp reversal. Yen tracks near 158.85/90 in early Friday dealings.

• USD/JPY had initially sold off around 90 pips following the US CPI release from 161.58 to 160.65. However, shortly after the data release, USDJPY took a very aggressive next leg lower, printing as low as 157.44 in short order before stabilizing.
• Lower core yields and a positioning squeeze will have undoubtedly been working in favour of the Japanese yen, however, the relative outperformance and subsequent commentary from Japanese officials point to the high likelihood of central bank intervention. For reference, Japan’s Kanda said recent moves are not reflecting fundamentals and are not stable, without giving an explicit reference to the MOF taking action. Onshore Japan media stated intervention took place, see this link .
• Levels wise, the pair traded through the 20-day EMA (159.95) and this exposed the next important support at 158.11, the trendline drawn from the Dec 28 low last year. The line has been pierced, a clear break is required to highlight a potential reversal. This would open 156.83, a Fibonacci retracement.
• Today's data calendar has final IP for May, along with capacity utilization, which are are unlikely to move sentiment.
• Notable FX option expiries for NY cut later sit comfortably above current spot levels: Y160.50($1.2bln), Y161.95-00($1.3bln).