- USD/JPY is on the backside of the prior bullish trend.
- The US Dollar remains in favour on hawkish data.
- The price is capped by the 135s so far and a move below 134.50 will be key for the week ahead.
USD/JPY is trading offered in the afternoon on Wall Street and is down some 0.2% within the range of the day between 135.36 and 134.60. The US Dollar rose against its major trading partners on Thursday ahead of the release of an update to Q4 Gross Domestic Product growth (that missed expectations) and Weekly Initial Jobless Claims, (that beat expectations) as well as the Personal Consumption Expenditure (that also beat expectations) and was revised upward to 3.7%, indicating inflation was much stronger than initially thought and helping to stoke bearish sentiment among traders.
Consequently, US Treasury yields edged lower in choppy trading, with those on the 10-year pulling back from three-month highs. This occurred despite investors pricing in the strong economic data of late that commenced with the last Nonfarm Payrolls report at the start of this month.
Benchmark 10-year Treasury notes were down at 3.881%, while the yield curve measuring the gap between the two- and 10-year Treasury notes was still inverted indicating a looming recession. Nevertheless, the US Dollar retained its strength against its major peers. The US Dollar index, which measures the greenback vs. a basket of currencies, DXY
climbed to a high of 104.779 before falling back to the 104.50s. The index is still up from the day's low of 104.308.
The greenback is firmer on the prospect of further monetary policy tightening after the Minutes of the Jan. 31-Feb. 1 Federal Open Market Committee meeting released Wednesday showed only "a few" participants wanted a larger 50 basis point increase at the meeting. All in all, officials favoured a moderation in the pace of rate hikes although they indicated that containing high inflation would be key to how much further rates need to rise which makes Friday's PCE deflator a key red news event. Ahead of the event, the federal funds target rate band stands at 4.50% to 4.75%
Friday will provide the Fed’s favoured inflation measure, the PCE deflator. ''The market is expecting the January headline data to remain at 5.0% YoY, in line with the previous month,'' analysts at Rabobank said. ''This would strengthen concerns that the downtrend in inflationary indicators may have stalled. Data in line with market expectations would thus add further weight to the view that the Fed will have to work harder to push inflation back to its target level. Currently implied market rates are pointing to a peak in Fed funds close to 5.33%.''
USD/JPY technical analysis
USD/JPY is on the backside of the prior bullish trend but remains supported by the hourly bullish trendline. However, the price is capped by the 135s so far and a move below 134.50 will be key for the week ahead.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
Gold retains solid gains after reaching fresh record highs Premium
Gold price hit yet another record high on Monday, as the US Dollar sell-off continued on the back of US President Donald Trump’s criticism of Federal Reserve Chair Jerome Powell, fueling concerns about the future of the US economy.
EUR/USD hovers above 1.1500 as investors drop the USD
The EUR/USD pair traded as high as 1.1574 on Monday, retreating from the over three-year high as fears cooled in the American session. Still, Wall Street edged sharply lower amid concerns about the Federal Reserve's autonomy.
GBP/USD tests 1.3400 as USD selloff continues
GBP/USD continues its winning streak, testing 1.3400 on Monday. The extended US Dollar weakness, amid US-Sino trade war-led recession fears and heightened threat to the Fed's independence, underpin the pair following the long weekend.
Bitcoin traders celebrate 3.125 BTC halving anniversary with $90K price prediction
Bitcoin price surges past $88,000 on Monday as traders mark the 3.125 BTC halving anniversary amid a rapid shift in investor focus away from USD-based investments.
Five fundamentals for the week: Traders confront the trade war, important surveys, key Fed speech Premium
Will the US strike a trade deal with Japan? That would be positive progress. However, recent developments are not that positive, and there's only one certainty: headlines will dominate markets. Fresh US economic data is also of interest.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.