Yesterday, the USD/JPY pair was little moved as negative economic data from Japan was offset by the threats from North Korea.
This morning, the pair moved high following a report on inflation that disappointed. The Statistics Bureau reported that the CPI grew by 0.6%, which was lower than the expected 0.7%. Last month, it had grown by 1.1%, providing hopes for tightening. The CPI, excluding food items rose by 0.7%, which was -0.1% lower than the previous month. CPI less food and energy, which are considered less volatile rose by 0.4%, which was 0.1% lower than last month.
The biggest contributor to sagging inflation were furniture and household utensils, and housing which fell by -1.5% and 0.2% respectively.
On the other side, the dollar was supported by a report by the New York Times. The report showed that the Chinese had agreed to boost trade by the United States by spending more than $200 billion. This will involve purchases of goods such as semiconductors and agricultural products. Faced with a tough mid-term election, the president could use a diplomatic deal instead of an economic one to please his base.
The pair is now trading at 110.8, which continues a gaining streak started on April, 20. It is trading inside the 30 EMA and 60 EMA as the RSI trades at the overbought position. There is a possibility that the pair could continue moving up mostly because of the divergence on monetary policy.