USD/JPY spikes to fresh 24-year peak, around mid-147.00s on stronger US CPI

• USD/JPY catches aggressive bids in reaction to stronger US CPI and hits a fresh 24-year peak.
• The USD rallies across the board after the US consumer inflation figures surpass expectations.
• Intervention speculations might hold back bulls from placing fresh bets and cap the upside.

The USD/JPY pair attracts fresh buying during the early North American session and spikes to a new 24-year peak, closer to mid-147.00s in reaction to hotter US consumer inflation figures.

The US Bureau of Labor Statistics reported that the headline CPI rose 0.4% in September and the yearly rate eased to 8.2% from 8.3% in August. Adding to this, core inflation, which excludes food and energy prices, held steady at 0.6% during the reported month and the yearly rate accelerated to 6.6% from 6.3% previous. The readings were higher than consensus estimates and reaffirms market bets for another supersized 75 bps Fed rate hike move in November.

The US dollar strengthens across the board in reaction to the stronger CPI report and turns out to be a key factor pushing the USD/JPY higher for the seventh successive day. The strong move up takes along some short-term trading stops placed near the 147.00 round-figure mark. Hence, the latest leg of a sharp rally over the past hour or so could also be attributed to some technical buying. It, however, remains to be seen if bulls are able to capitalize on the move.

The markets have already been pricing in a more aggressive policy tightening by the Fed, which is evident from a rather muted reaction in the US fixed-income market. Apart from this, speculations for more currency market intervention by Japanese authorities and a fresh leg down in the equity markets should offer some support to the safe-haven Japanese yen. This, in turn, might cap the upside for the USD/JPY pair amid near-term overbought conditions.

Technical levels to watch