USD/JPY traders high amid the US inflation expectations and the China evergrande favorable updates helping in the US dollar strength by improving market mood.

The US Consumer Price Index (CPI) made a jump to a three-decade high of 6.2% YoY thus encouraged Fed rate hike expectations. The views on the monetary policies led to rise in the US Treasury yields which again favored greenback.

China Evergrande, the country’s indebted real estate giant avoided a formal default third time after a bondholder said that the company made interest payment to the tune of $148 million on Wednesday, meeting the payment deadline. This news underpinned the bullish trend of USD/JPY.

Elsewhere, Inflation data as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, also rallied and refreshed the highest levels since May 2006 on Wednesday.

Comments from Patrick Timothy Harker and Mary C Daly, respective Presidents of the Federal Reserve Bank of Philadelphia and San Fransisco, tried to defend the Fed doves. Mr. Harker highlighted the possibilities of a rate hike even while tapering is on whereas Fed’s Daly said that it would be premature to change the calculation on raising rates. This mixed comments from fed officials also could be held as a reason behind the recent USD/JPY move.

Speaking about the Sino-American trade deal, not-so-positive comments from US Trade Representative (USTR) Katherine Tai ahead of the next week’s virtual summit of US President Biden and his Chinese counterpart Xi Jinping add to the risk sentiment.

USD/JPY 4 Hour Chart:

Support: 113.11 (S1), 112.32 (S2), 111.87 (S3).

Resistance: 114.35 (R1), 114.80 (R2), 115.59 (R3).

These risk catalysts will key the pair today due to bank holiday in US. We expect a bullish trend for USD/JPY.