Skip to content

We want to clarify that IG International does not have an official Line account at this time. We have not established any official presence on Line messaging platform. Therefore, any accounts claiming to represent IG International on Line are unauthorized and should be considered as fake.
CFDs are complex instruments. 72% of retail client accounts lose money when trading CFDs, with this investment provider. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money.
CFDs are complex instruments. 72% of retail client accounts lose money when trading CFDs, with this investment provider. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money.

USD/JPY shying away from 20-year high ahead of US CPI

The May reading for the consumer price index (CPI) in the US is expected to be a mover for the US dollar.

Video poster image

CPI expectations

The May reading for the consumer price index (CPI) in the United States is expected to be an important mover for the US dollar.

Analyst forecasts show the growth in the core reading softening slightly when compared to April, whilst the headline is likely to have continued to grow at a faster pace in May. This outcome would be a good reading for the economy.

Headline inflation, which includes volatile prices like energy and food, is expected to continue to pick up as the unresolved conflict in Ukraine keeps commodity prices at record highs. Policymakers are expecting this, and so are markets, and therefore the key focus is going to be on core inflation.

Whilst energy and food prices are a key part of consumer spending and, therefore, they have a big effect on the economy, the more volatile nature of these prices mean we are able to momentarily look past them if we know, or think we know, the main source of their elevated prices, which in this case is the war in Eastern Europe.

And so that is why markets are likely going to be focusing on this potential softening of core CPI, because we are happy to dismiss higher energy and food prices for the time being. If everything else is starting to show easing price pressures, then we may take it as a sign that stagflation – persistent high inflation and slowing growth – may not be such a big threat after all.

A core CPI reading below expectations of 0.5% would ease pressure on the Federal Reserve (Fed) to act too aggressively to combat inflation, potentially reducing the size of the rate hike at the meeting next week. In this case, the US dollar (USD) is likely to see a further pullback from recent highs.

USD/JPY

This would play out nicely in USD/JPY, given the pair has been trading in a strong ascending pattern for the last two weeks. A pullback in the dollar may see USD/JPY back below previous resistance at 132.38, before finding some support at 130.00.

On the flip side, a stronger than expected reading would likely push up the pair even higher, with the January 2002 highs in sight at 135.18, confirming the current bullish pattern.

If the consumer price index comes in as expected at 0.5% then the US dollar is likely going to continue to be supported but the move higher may be short-lived.


This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Start trading forex today

Trade the largest and most volatile financial market in the world.

  • Spreads start at just 0.6 points on EUR/USD
  • Analyse market movements with our essential selection of charts
  • Speculate from a range of platforms, including on mobile

Find out more

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

You might be interested in…

<h3>How much does trading cost?</h3>
<h3>Find out about IG</h3>
<h3>Plan your trading</h3>

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.