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Dollar's 2024 uptrend vs yen tested by soft CPI, Fed view key



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June 12 (Reuters) -USD/JPY plunged on Wednesday, tracking Treasury yields lower after unexpectedly weak U.S. CPI data, and the uptrend since December may be tested if the Fed leaves the market expecting faster rate cuts than currently priced in.

Prices fell below 156 from today's 157.365 high, probing the cloud top and kijun at 155.80/66.

Though the downside CPI misses for May were only by 0.1, there's been a very dovish reaction, with Fed now seen highly likely to cut rates in September and again by December.

Two-year Treasuries yields fell 16bp and broke below June and May lows, as well as the 100-day moving average. Ten-year yields probed June's lows.

If those yield drops persist after the Fed meeting and Chair Jerome Powell's press conference, USD/JPY could well test the 55-day moving average that caught June and May lows, now by 155, and perhaps the uptrend line off December and March lows and last week's swing low at 154.55/54.

Pullbacks have been short-lived due to still relatively high Treasury-JGB yields spreads, despite those spreads retreating from this year and last year's peaks and Japanese interventions.

It might take a dovish Fed, greater BoJ concern about yen weakness and more signs of a slowing U.S. economy to make retesting 2023/22 tops by 152 more likely than 2024's 160.245 peak.

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(Randolph Donney is a Reuters market analyst. The views expressed are his own.)

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