USD/JPY bulls hesitate around mid-130.00s as upbeat Japan data tease BoJ hawks

• USD/JPY struggles to extend week-start rebound amid strong statistics from Tokyo.
• Japan’s Unemployment Rate remains unchanged but Industrial Production, Retail Trade cross market forecasts in December.
• Mixed sentiment, hawkish concerns surrounding BoJ keeps Yen pair sellers hopeful.
• US CB Consumer Confidence, risk catalysts will be crucial ahead of the FOMC.

USD/JPY grinds higher around 130.50 as robust Japanese statistics renew the market’s concerns surrounding the Bank of Japan’s (BoJ) hawkish move during early Tuesday. In doing so, the Yen pair also probes the week-start run-up amid the sour sentiment ahead of the top-tier data/events.

Japan’s Unemployment Rate remained unchanged near 2.5% in December, but the Retail Trade rose past 0.5% in market forecasts to 1.1% during the stated month. On the same line, the Industrial Production also crossed -1.2% consensus with a -0.1% figure for December.

It should be noted that the market’s cautious mood ahead of this week’s Federal Open Market Committee (FOMC) and the US monthly jobs report triggered the rush toward the US Dollar the previous day, especially amid the firmer US Treasury bond yields. In doing so, the Yen pair ignored chatters surrounding the BoJ’s likely pushback to the 2.0% inflation commitment.

That said, the US 10-year Treasury bond yields rose 2.4 basis points (bps) to 3.542% while rising for the third consecutive day, primarily unchanged by the press time as dovish bets on the Federal Reserve (Fed) take a halt even if the hawks are far from the entry.

Behind the moves could be the stronger prints of the US Dallas Fed manufacturing index for January, which jumped to -8.4 while adding 11.6 points and marking the highest reading since May 2022.

China’s inability to spread optimism after returning from the one-week-old Lunar New Year holiday, even with hopes of witnessing an end to the Covid wave, also favored the USD/JPY buyers.

It should be noted that the cautious risk profile before the equity heavyweights like Amazon, Alphabet, Apple and Meta released their quarterly earnings also underpinned the USD/JPY run-up the previous day.

Alternatively, a government panel suggested pushing the 2.0% inflation target to a broader timeframe, triggering hopes of the BoJ’s hawkish move. On the same line could be the comments from BoJ Governor Haruhiko Kuroda, who signaled that the inflation target is achievable.

Looking forward, USD/JPY may remain sidelined amid the dicey markets. However, January's fourth quarter (Q4) US Employment Cost Index (ECI) and the Conference Board’s Consumer Confidence gauge will be crucial for the pair traders to watch for fresh impulses.

Technical analysis

A daily closing beyond the 21-DMA level surrounding 130.35, the first early November 2021, keeps USD/JPY buyers hopeful.