[VIDEO] More inflation data pushing USD/JPY higher

If yields rise, USD/JPY is likely to follow given the current positive correlation.

FOREX 10

The core PCE Price Index, which is said to be one of the FED’s favorite data points for measuring inflation, was 1.5% YoY vs 1.3% in December, indicating that inflation expectations are growing! Although one data point does not indicate a trend, it falls in line with other inflation readings that inflation is on its way.

And since the beginning of February, USD/JPY has linked up with the move in yields. The correlation coefficient on a daily timeframe now stands at +0.76  So, with rising yields, comes a rising USD/JPY.  Yesterday, USD/JPY moved higher above the 38.2% Fibonacci retracement from the July 1st highs to the January 6th lows, near 106.27. 

If inflation expectations continue to rise, yields should continue to rise as well.  And if yields rise, USD/JPY is likely to follow given the positive correlation. 

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Also see: Everything you should know about the Japanese Yen | JPY price history


 

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