Global macro overview for 14/08/2017:
The recent inflation data from the US were in line with market participants' expectations. The CPI data were released at the level of 1.7% on yearly basis, but on monthly basis were worse than expected: 0.1% vs. 0.2% (still better than last month 0.0% though).
Disappointment with the reading of the July CPI inflation in the US was not high, as the annual growth rate was in consensus, but the monthly was worse. The weakness was caused by a decline in hotel prices, a highly variable element and not relevant to the monetary policy. Key components (especially on the services side) have fallen as well, but that does not change the fact that the inflation acceleration towards the 2.0% target still can not be seen. This situation looks less encouraging to the Fed's hawks, but also market participants do not see the grounds for discounting more chances for another interest rate hike this year. However, the market valuation before the Friday reading was relatively low (about 40%) and the disappointment was below 0.1%. This is not a solid foundation to move expectations lower. The US dollar also stopped selling off the strength that it had built up in previous days in the hope of a positive surprise. We are at a point where the market knows as much about the future of Fed policy and its impact on the US dollar, as at the beginning of last week.
Let's now take a look at the USD/JPY technical picture on the H4 timeframe. The market is bouncing back up from the technical support at the level of 108.79 towards the key technical resistance at the level of 109.84. The oversold market conditions and strong momentum indicator support the temporary bullish outlook.
