USD/JPY drifts to around 162.20 on Wednesday as a softer June US inflation print pushes traders to trim their Fed rate-hike bets. The pair is coiling inside an ascending triangle, a sign of contracting volatility.
The Japanese Yen edged higher against the US Dollar during Wednesday's European session, with USD/JPY trading around 162.20 as the Greenback lost ground. The move followed easing fears of further interest rate hikes by the Federal Reserve this year.
Soft CPI trims Fed hike bets
Selling pressure on the Dollar built after June's Consumer Price Index came in soft, prompting traders to pare back hawkish Fed wagers. The report showed headline and core inflation decelerated to 3.5% and 2.6% Year-on-Year, respectively. As a result, the US Dollar Index, which tracks the Greenback against six major currencies, traded 0.16% lower to near 100.78 at press time.
Even so, Fed Chairman Kevin Warsh reiterated in his testimony on Tuesday that price stability is non-negotiable. According to FXStreet, Warsh said the Fed has "no tolerance for persistently elevated inflation." Meanwhile, in Tokyo, investors are hunting for fresh cues on whether the Bank of Japan will raise rates again this year.
Ascending triangle signals a coiled market
On the chart, the pair is sticking close to its 20-period exponential moving average at 162.10, pointing to a sideways trend. The ascending triangle pattern reflects a sharp contraction in volatility, while the Relative Strength Index sits at 51.51, a neutral-to-positive reading that suggests steady but not overstretched buying.
A clear break above resistance near 162.79, the descending trend line, would open the way for a stronger bullish extension. On the downside, initial support sits near 161.79; a move below it would expose the pair to the July 3 low near 160.50.
Source: FXStreet
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