USD/JPY edges down from multi-decade high near 161.00 on Japan’s intervention buzz

USD/JPY corrects modestly from multi-decade highs as fears of Japan’s intervention deepen.
The BoE will likely reduce the amount of bond-buying in upcoming policy meetings.
US Durable Goods Orders unexpectedly grew by 0.1% in May.

The USD/JPY pair delivers a slight corrective move in Thursday’s New York session after posting a fresh multi-decade high at 160.87. The pair falls slightly as fears of Japan’s intervention have intensified to cushion the weak Japanese Yen.

Sheer weakness in the Yen is resulting in higher exports and a sharp increase in import costs, which is boosting inflationary pressures. The Japanese administration has been reiterating that they are ready to intervene against excessive FX moves. The 160.00 resistance appears to be a crucial price level at which the administration could purchase Yen. Also, the administration was expected to have intervened near these levels two months ago.

On the monetary policy front, investors expect that the Bank of Japan (BoJ) could deliver an early rate hike move due to stubborn inflation expectations. The BoJ is also expected to cut down the scale of its bond-buying operations in the upcoming policy meeting.

Meanwhile, the US Dollar (USD) is under pressure with United States (US) core Personal Consumption Expenditure price index (PCE) data for May, which will be published on Friday. The core PCE inflation data, a Federal Reserve’s (Fed) preferred inflation measure, is estimated to have grown at a slower pace of 0.1% against 0.2% in April month-on-month. Annually, the underlying inflation is projected to have decelerated to 2.6% from the former release of 2.8%.

On the economic data front, US Durable Goods Orders for May unexpectedly rose by 0.1%. Economists forecasted them to have declined by 0.1% after an expansion of 0.6%, downwardly revised from 0.7%. Fresh orders for Durable Goods are a leading indicator of core Consumer Price Index (CPI) data. Meager growth in New Orders for Durable Goods doesn’t pose major upside risks to price pressures.

Economic Indicator

Core Personal Consumption Expenditures - Price Index (YoY)

The Core Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The PCE Price Index is also the Federal Reserve’s (Fed) preferred gauge of inflation. The YoY reading compares the prices of goods in the reference month to the same month a year earlier. The core reading excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures." Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.

Why it matters to traders?

After publishing the GDP report, the US Bureau of Economic Analysis releases the Personal Consumption Expenditures (PCE) Price Index data alongside the monthly changes in Personal Spending and Personal Income. FOMC policymakers use the annual Core PCE Price Index, which excludes volatile food and energy prices, as their primary gauge of inflation. A stronger-than-expected reading could help the USD outperform its rivals as it would hint at a possible hawkish shift in the Fed’s forward guidance and vice versa.

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