USD/JPY soars to test 114 with more to go, 114.50 eyed for days ahead

• The US dollar is on fire following the US CPI surprise beat.
• USD/JPY has rallied 1% in the day and bulls seek space on the 114 round number.

The US Consumer Price Index rose 0.9% last month after gaining 0.4% in September and has sent the greenback higher across the board. USD/JPY has rallied around 1% on the day as a consequence, penetrating critical resistance on the charts. At the time of writing, USD/JPY is trading around the highs of the day near 114 the figure after rallying from a low of 112.77 to a high of 114.01 so far.

In the 12 months through October, the consumer price index accelerated 6.2% the US Labor Department said on Wednesday, while analysts expected on average the rise to be limited to 5.8%. The Consumer Price Index rose 0.9% last month after gaining 0.4% in September and in the 12 months through October. 

DXY rallied into 94.80s, stocks on a knife-edge

The Federal Reserve last week restated its belief that the current inflation surge is transitory, but this data comes in stark contrast to that assumption and has sent the US dollar on a tear. The US dollar index, DXY, which measures the greenback against six major currencies, was up 0.86% at 94.80 and has accelerated its gain after reaching a high of 94.440 immediately after the data was released.

Many investors had feared that underestimating price increases could prove to be a costly policy mistake and markets are responding in kind. US stocks have plummeted with the S&P 500 no won course for a significant correction towards the Oct 4,600s, supporting the risk-sensitive JPY. Additionally, the Evergrande default news is denting risk-sensitive assets. 

Evergrande and US inflation fears sink US stocks