USD/JPY marches to reclaim all-time-highs at 137.80 ahead of US Inflation

• USD/JPY is aiming to reclaim all-time highs at 137.80 as US CPI is expected to accelerate.
• The negative divergence in the core CPI and plain-vanilla CPI dictates the impact of oil and food prices.
• The BOJ is putting efforts to spurt the inflation rate and in maintaining it above 2%.

The USD/JPY pair is scaling higher on a bullish open-rejection reverse trading structure. The asset opened at 136.83 and slipped lower to 136.70, however, a responsive buying action drove the pair above the opening price confidently. The major has comfortably established above 137.00 and is likely to reclaim its all-time highs at 137.80 on expectations of a higher inflation rate by the US Bureau of Labor Statistics.

As per the market consensus, investors should brace for an elevation in the price rise to 8.8%. Taking into account the prior release of 8.6%, the mathematics indicate an increment by 20 basis points (bps). However, the impact of energy bills and food products is more than that.

The core Consumer Price Index (CPI) that doesn’t inculcate oil and food prices may slip to 5.7% from the prior release of 6%.  A simultaneous increase in plain-vanilla CPI and a decrease in core CPI indicates that the impact of oil food prices is more than expected.

Apart from the US Inflation, Friday’s US Retail Sales will also remain in focus this week. The economic data is seen meaningfully higher at 0.8% than the prior print of -0.3%.

On the Tokyo front, the continuation of the dovish stance by the Bank of Japan (BOJ) will weaken the yen bulls further. The BOJ has no intention to even move toward a neutral stance as the economy needs more liquidity to accelerate inflation further and also for managing it above 2%. Also, Japan’s core CPI needs much attention.