USD/JPY bulls stay the course into the 133 area

• USD/JPY bulls are in the market and pushing the price into the 133 area. 
• US CPI supported the US Dollar while the new BoJ head stays the course with YCC.

USDJPY is flat in early Asia, consolidating the overnight volatility that occurred in a relatively standard range as the market continues to try to second-guess the Federal Reserve's next move based on the latest data. The pair rallied to a high of 133.31 from a low of 131.498. 

First of all, the Yen was initially bid on the back of the surprise choice in the new Bank of Japan's governor  Academic Kazuo Ueda who faces a rocky time. ''He is respected but as an outsider lacks factional support within the financial bureaucracy and faces an unpopular prime minister pushing an expensive agenda,'' reporters at Reuters wrote. 

It was anticipated that Ueda would have to modify or abandon YCC given how much damage it is doing to the bond market and the BOJ’s balance sheet. But he is unlikely to start normalising rates straight away and he announced that the central bank will need to stick with the YCC. Speaking on Japanese TV, earlier in the week, Ueda remarked that it is important for the BoJ to keep easing for now. As a consequence, JPY gave back many of its initial gains ahead of the US Consumer Price Index on Tuesday. 

''Assuming some relaxation in YCC, we see scope for a move to USD/JPY128 on a 3 month view.  However, a hawkish Fed is likely to limit the scope for JPY appreciation,'' analysts at Rabobank said. 

The annual inflation rate in the US, as measured by the Consumer Price Index,  slowed only slightly to 6.4% in January from 6.5% in December, less than market forecasts of 6.2%, suggesting that getting inflation under control will take more time than expected.

The US Dollar index traded around 103.00 on Tuesday but posied higher due to the hotter-than-expected US inflation dashing hopes that the Federal Reserve will soon end its tightening campaign.