USD/JPY eases above 140.00 as traders await BoJ's YCC move, July expectations

• USD/JPY grinds near intraday low to reverse the previous day’s pullback from yearly top.
• Pre-BoJ consolidation wrestled with downbeat yields, broad US Dollar weakness on volatile Thursday.
• BoJ is expected to keep monetary policy intact, clues for July, YCC will be crucial to watch.
• BoJ Governor Ueda’s speech, US statistics also eyed for clear directions.

USD/JPY holds lower ground near 140.10-15 as it stays pressured around the intraday low while defending the previous day’s retreat from the yearly top as traders await the Bank of Japan (BoJ) moves amid Friday’s Asian session.

The Yen pair rallied to the multi-day high the previous day after the Federal Reserve (Fed) market hawkish halt and the Bank of Japan (BoJ) clues kept defending the easy-money policy. However, the market’s latest cautious mood amid fears of witnessing clues of future change in the ultra-easy monetary policy, as well as the Yields Curve Control (YCC) policy prod the BoJ doves, which in turn exert downside pressure on the Yen pair prices amid sluggish hours of Tokyo open.

On Thursday, Japan’s Merchandise Trade Balance deficit widened in May but Machinery Orders improve for April.

In the same way, US Retail Sales growth marks an increase of 0.3% for May versus -0.1% expected and 0.4% previous readings while the Core readings, mean Retail Sales ex Autos, match 0.1% market forecasts for the said month, compared to 0.4% prior. Further, NY Fed Empire State Manufacturing Index jumps to 6.6 in June versus -15.1 expected and -31.8 prior whereas Philadelphia Fed Manufacturing Index drops to -13.7 for the said month from -10.4 prior and compared to -14 market forecasts. Additionally, US Industrial Production for May cools down to -0.2% against 0.1% estimated and 0.5% prior while Initial Jobless Claims reprints the upwardly revised figures of 262K for the week ended on June 09 versus 249K expected.

It should be noted that BoJ Governor Kazuo Ueda said the last week that the central bank should continue with "monetary easing patiently." The same joins the dovish comments from other BoJ officials and mixed Japan data to suggest no action in today’s monetary policy meeting. However, the inflation and employment figures from Japan have recently been impressive and hence tease the Asian major’s exit from the ultra-loose policy, which in turn highlights the BoJ’s clues for the July meeting and the YCC for clear directions.

Apart from that, the tone of BoJ Governor Ueda and second-tier US data, as well as the bond market moves, will be eyed closely for clear directions.

That said, the CME’s FedWatch Tool signals that market players place nearly 67% bets on the July Fed rate hike of around 25 basis points (bps). The same depicts the traders’ lack of conviction in the Federal Reserve’s (Fed) almost clear signals for a hawkish move in July. With this, Wall Street benchmarks rallied more than 1.0% each whereas the US 10-year Treasury bond yields plummeted to 3.72%. Further, the US Dollar Index (DXY) dropped the most in three months while poking the lowest levels since May 12, to 102.15 at the latest.

Hence, the USD/JPY pair is justifying the aforementioned mixed catalysts amid the pre-BoJ sentiment. However, the bears have fewer reasons to cheer unless the Japanese central bank flashes any hawkish signals.

Also read: Bank of Japan Preview: No surprises expected, looking at July

Technical analysis

A 3.5-month-old rising wedge bearish chart formation teases Yen pair sellers amid overbought RSI. That said, the risk-barometer pair seesaws between 141.60 and 137.70 region.