USD/JPY Loses Ground Despite Strong Economic Data but..

The Japanese Yen continued to weaken on Thursday, even as economic data showed a positive trend. The Tokyo Consumer Price Index (CPI) increased to 2.2% year-over-year in May, up from April's 1.8%, which marked a 26-month low. In addition, Japan’s Retail Sales (YoY) grew 2.4% in April, accelerating from a downwardly revised 1.1% rise in March and surpassing market forecasts of 1.9% growth. This marks the 26th consecutive month of expansion, indicating a sustained period of healthy consumption in Japan.

Monetary Policy Implications

The Bank of Japan (BoJ) has maintained its deeply entrenched monetary policy stance. Should nationwide inflation in Japan decline, it would prevent the central bank from raising interest rates. The significant rate differential between Japan and other countries continues to exert pressure on the Japanese Yen, underpinning the USD/JPY pair.

US Dollar Rebound

The US Dollar (USD) rebounded ahead of the Federal Reserve's preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index, which is due to be released today. However, the decline in US Treasury yields could limit the advance of the US Dollar.

Technical Analysis

From a technical perspective, we are anticipating a rebound for the Yen, particularly if the US Core PCE Price Index shows a negative impact. The footprint analysis reveals several areas of demand on the daily timeframe chart, where the value could find support for a possible reversal.

Investors should monitor the upcoming Core PCE data closely, as it will likely influence the near-term direction of both the USD and JPY.

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