USD/JPY steady near session high after US CPI

The greenback recovery move gained additional boost following the release of US CPI print, lifting the USD/JPY pair to a fresh session high beyond 113.50 level.

Spot gained fresh traction after data released from the US showed consumer inflation, as measured by CPI, picked up in December, driving the yearly inflation to 2.1% as compared to 1.7% recorded in the previous month. Excluding the volatile food and energy price, core CPI rose at yearly pace of 2.2% in December.

Higher inflation might revive hopes that Federal Reserve would be prompted to opt for steeper rate-tightening cycle in 2017, should the incoming Trump administration's reflation policies continue fueling the inflationary pressure in the economy. A fresh wave of up-move in the US treasury bond yields is supportive of the market expectations and provided an additional boost to the US Dollar's ongoing recovery move. 

The pair's recovery, however, lacked follow through momentum as investors now look forward to the Fed Chair Janet Yellen's speech in order to gain fresh insights over the central bank's near-term monetary policy outlook and determine the pair's next leg of directional move. In the meantime, industrial production and capacity utilization data, and speeches from Dallas Fed President Kaplan and Minneapolis Fed President Kashkari would be looked upon for some short-term trading opportunities. 

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet notes, "Short term, the 1 hour chart shows that technical indicators remain well above their mid-lines, losing partially their upward strength, whilst the price remains well below its moving averages, with the 100 SMA currently reinforcing the static support at 114.00. In the 4 hours chart, indicators are recovering from oversold readings, but still within bearish territory, whilst the 100 SMA extended its downward move, converging now with the 200 SMA at 116.00."