The USD/JPY currency pair has seen some recovery in early Friday trading, bouncing back from intraday lows near 156.40 to reach the 157.00 handle. The Tokyo Consumer Price Index (CPI) inflation in Japan also saw an increase in May, rising to 2.2% from 1.8% in the previous period. This positive CPI data has allowed investors to shift their focus towards the upcoming US Personal Consumption Expenditures (PCE) Price Index inflation print on Friday.
In addition to the CPI data, Japanese Retail Trade numbers also rebounded from a two-year low to 2.4%, surpassing the forecast of 1.9%. The previous figure of 1.1% was revised even lower to 1.2%. With Tokyo CPI inflation now out of the way, investors are eagerly awaiting the key US economic data set to be released on Friday.
Market sentiment received a boost on Thursday after US Gross Domestic Product (GDP) growth for the first quarter eased to 1.3%, down from 1.6% in the previous period. This has fueled hopes of a potential rate cut by the Federal Reserve, lifting risk sentiment across the board heading into Friday’s trading session.
The upcoming US Core Personal Consumption Expenditure (PCE) Price Index inflation data is expected to hold steady at 0.3% MoM. Investors are hopeful that weaker economic figures in the US will push the Fed towards implementing a rate cut. The CME FedWatch Tool indicates that rate markets are pricing in a high probability of at least a quarter-point rate cut when the Federal Open Market Committee meets in September.
On the technical side, USD/JPY has struggled to maintain gains above the 200-hour Exponential Moving Average (EMA) at 156.73, retreating back towards the 156.80 level. Despite a minor pullback, the overall trend remains bullish as bids continue to hold above the key 200-day EMA at 149.47. The daily candlesticks show a bearish pattern following a decline on May 15, but the pair still remains firmly in an upward trajectory.
In conclusion, the USD/JPY pair has seen a bounce in early Friday trading, driven by positive CPI data from Japan and hopes of a potential rate cut by the Fed. Investors are eagerly awaiting the US PCE Price Index inflation data due on Friday, which could further influence market sentiment. The technical outlook suggests that the pair remains bullish, despite a minor retreat towards the 156.80 level.