Investing.com — The yen has held up against the dollar’s recent strength as the market sell-off led to bids in the safe-haven currency, but should U.S. inflation data surprise on the upside later this week, it is unlikely this resilience will survive. of BofA Global Research said in a recent note.
“If the US CPI surprises on the upside this week, upward pressure on the USDJPY spot is likely to resume, due to the pair’s high sensitivity to CPI surprises,” the strategists said.
The Japanese yen has remained resilient against the dollar’s recent broad-based rally, supported by its risk hedge status amid a decline in equity prices and the already elevated USD/JPY spot level. This could change with the upcoming US Consumer Price Index (CPI). report, she added.
BofA’s expects the core pressure, which excludes food and energy, to be 0.3% month-on-month, slightly above the consensus of 0.2%. The CPI data will be released on Wednesday.
The bank’s trend model shows a bullish continuation signal for the USDJPY spot’s uptrend, indicating further upside potential for the pair. Still, a downward CPI surprise and an hawkish speech from Bank of Japan Deputy Governor Ryozo Himino this week pose risks to the bullish call on , the strategists said.
Himino is expected to give a speech on Tuesday, just weeks before the BoJ meeting on January 23-24.
