- USD/JPY takes offers to refresh daily lows and snaps a 3-day uptrend around weekly high.
- Japanese retail trade in May beat market expectations and previous readings.
- Yields remain under pressure for the second day on recession/inflation fears, BOJ’s Kuroda reiterated support for easy money policies.
- US data and Fed Chair Powell’s attendance at the ECB forum are key catalysts for the fresh impetus.
USD/JPY is consolidating weekly gains during Wednesday’s weak Asian session, recovering from an intraday low around 135.90 at press time. The yen pair broke out of a three-day uptrend around a weekly high. The recent weakness in the listing could be related to strong retail data from Japan as well as a weak Treasury yield.
Japanese retail sales rose 3.6% yoy in May versus 3.3% exp and revised 3.1%. Sales from major retailers rose 8.5% compared to 1.3% expected and 4.0% previously.
On the other hand, market indecisiveness on economic stance and inflationary fears weigh on FedSpeak to weigh on US Treasury yields, which in turn have caused USD/JPY rates to plummet recently. However, the 10-year US Treasury yield falls to 3.157% for the second straight day, while S&P 500 futures are down slightly at press time.
A rise in US consumers’ one-year inflation expectations quickly joined FedSpeak to renew fears of a rate hike. In terms of data, the US Conference Board (CB) consumer confidence index fell for the second straight month to 98.7 from 100.0 in June and 103.2 in May. The closely watched consumer sentiment indicator fell to its lowest level since February 2021. Further details showed that the expected one-year consumer inflation rate rose to 8% from the revised reading of 7.5% in May. It should be noted that according to the latest release for May, the US trade deficit fell to the lowest level in a year at $104.3 billion.
Elsewhere, the Group of Seven (G7) nations announced sanctions on Russian oil prices, while North Atlantic Treaty Organization (NATO) meetings hint at a less-than-welcome atmosphere for China. Additionally, US Deputy Secretary of Commerce Don Graves said, according to Bloomberg TV, “a clear US response to China’s tariffs is coming soon,” fueling fears of a new Sino-US feud.
In addition to what was mentioned above, recent comments from Bank of Japan (BOJ) Governor Haruhiko Kuroda are also weighing on USD/JPY rates. “Unlike other economies, the Japanese economy is not severely affected by global inflationary tendencies, so monetary policy will remain accommodative,” BOJ’s Kuroda said.
Looking ahead, US core consumption spending (PCE) for the first quarter of 2022, which is expected to remain flat at 5.1%, will be significant. Along the same lines will be the final figure for US Q1 GDP, which is likely to confirm a 1.5% annual contraction. The central bankers’ discussion about clear guidelines in the ECB forum will be decisive for market participants.
A clear break to the upside of the weekly resistance line and a successful trade ahead of the 10-DMA, around 134.75 and 135.30 respectively, took USD/JPY to a monthly high of 136.75.