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FOREX: USDJPY Slips Below 20-Day EMA, GBP Whipsaws Post-CPI

FOREX
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  • The Japanese Yen is outperforming on Wednesday, as lower core yields and BOJ rhetoric have boosted local FX sentiment. USDJPY has declined 0.77% at typing and is around 130 pips off session highs at 156.70.
  • As a reminder, headlines from BoJ Governor Ueda have crossed overnight, reiterating that a decision on whether to raise rates will be made next week (so largely echoing Deputy Governor Himino's remarks from yesterday). The probability for a hike on Jan 24 has now risen to around 70%. Alongside this dynamic, lower core yields have assisted the move lower for USDJPY, with the pair slipping below its 20-day EMA for the first time since Dec 12.
  • With Fed pricing having shifted so quickly away from 2025 cuts, CPI data today is a good juncture to assess whether markets have gotten too hawkish, and a deeper correction for USDJPY will target 156.02 (Dec 31 low) and 154.71, the 50-day EMA.
  • GBP volatility has also been a key feature of the early Wednesday session, following the lower-than-expected UK CPI data. While sterling initially traded weaker on the release (GBPUSD down to a 1.2163 low), the potentially good news for the UK economy and the fact the downside surprise was mostly driven by volatile components assisted a sterling recovery.
  • GBPUSD reversed as high as 1.2241, with similar price action for EURGBP seeing the cross briefly slip back to 0.8420.
  • The USD index sits 0.2% lower on the session, extending its pullback to around 1.1% from cycle highs earlier in the week. All focus will be on the US CPI release as the near-term driver for US yields and associated greenback sentiment.
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  • The Japanese Yen is outperforming on Wednesday, as lower core yields and BOJ rhetoric have boosted local FX sentiment. USDJPY has declined 0.77% at typing and is around 130 pips off session highs at 156.70.
  • As a reminder, headlines from BoJ Governor Ueda have crossed overnight, reiterating that a decision on whether to raise rates will be made next week (so largely echoing Deputy Governor Himino's remarks from yesterday). The probability for a hike on Jan 24 has now risen to around 70%. Alongside this dynamic, lower core yields have assisted the move lower for USDJPY, with the pair slipping below its 20-day EMA for the first time since Dec 12.
  • With Fed pricing having shifted so quickly away from 2025 cuts, CPI data today is a good juncture to assess whether markets have gotten too hawkish, and a deeper correction for USDJPY will target 156.02 (Dec 31 low) and 154.71, the 50-day EMA.
  • GBP volatility has also been a key feature of the early Wednesday session, following the lower-than-expected UK CPI data. While sterling initially traded weaker on the release (GBPUSD down to a 1.2163 low), the potentially good news for the UK economy and the fact the downside surprise was mostly driven by volatile components assisted a sterling recovery.
  • GBPUSD reversed as high as 1.2241, with similar price action for EURGBP seeing the cross briefly slip back to 0.8420.
  • The USD index sits 0.2% lower on the session, extending its pullback to around 1.1% from cycle highs earlier in the week. All focus will be on the US CPI release as the near-term driver for US yields and associated greenback sentiment.