USD/JPY Hits 99.68 Ahead of Chinese Inflation

The one-way move in USD/JPY continued on Monday as the pair added another 200 pips and touched the highest since 2009. The Australian and New Zealand dollars were the best performers on expectations that Japanese money will chase yield. The main AUD risk in the upcoming session is the CPI report from China. The 3rd long in USDJPY hit all targets since Friday, while the 4th is in progress awaiting a higher final target. Last night's EURJPY hit all targets at 129.20, awaiting the 2nd to hit final target at 129.80 from 127.70. Rest of trades are seen in full in the latest Premium Insights.

The pace of the rally in USD/JPY has been breathtaking and now 100.00 is easily within striking distance. The one constant in the pair since November has been that pullbacks have been shallow, leaving patient dip buyers stuck on the sidelines. One thing that is different this time is the speed of the rally with USD/JPY up more than 700 pips since Thursday and crosses up more than 1000 pips. A test of 100 is inevitable at this point and short-term longs may be quick to take profits.

Outside of the yen, moves this week have been small. One exception is cable, which has retraced most of Friday's rally.

The first event to watch in Asia-Pacific trading is a speech from Bernanke at 2315 GMT. The Chairman's topic is bank stress testing so those looking for comments on the monetary policy outlook are likely to be disappointed.

Up next is Australian NAB business confidence at 0130 GMT. In general, the impact of this release is low and there is no consensus estimate.

At the same time China releases March official CPI numbers. With inflation expected to decelerate to 2.5% y/y from 3.2% in February, officials should be able to breathe a sigh of relief. The risk is that prices remain stubbornly high and force the government to take action, which could weaken the growth-sensitive commodity currencies.