The US dollar remained range-bound against the yen on Friday following the release of lower-than-anticipated economic data from both the US and Japan. While Tokyo’s core consumer price index data for May missed estimates, the US prelim wholesale inventories were higher than expected. Overall, the USD/JPY pair remained range-bound between 126.68 and 127.05.
According to the Japanese Statistics Bureau, Tokyo’s core consumer price index rose by 1.90% y-o-y in May, following a 1.90% rise in the prior month and a notch lower than the 2% growth anticipated by economists.
The data published by the ministry of internal affairs indicated that a sharp rise in processed food prices was negated by small gains in energy costs.
The aforesaid figures reflect the huge disparity in price changes between Japan and the West (the US and Europe), where central banks have resorted to rate hikes to contain inflation.
Interestingly, inflation has crossed the Bank of Japan’s objective of 2% in April. However, Governor Haruhiko Kuroda continues to state that the energy price rises are not sustainable. He is also of the view that Japan’s economy still requires support in the form of monetary easing.
According to the data published by the Bureau of Economic Analysis, the US core PCE prices, which exclude food and energy, rose by 0.30% m-o-m in April, following a 0.30% increase in the prior month, and in line with economists’ estimates. Notably, the US Fed’s inflation barometer fell to a four-month low of 4.90% in April, from 5.20% in March, and met economists’ expectations.
According to the US Census Bureau, the country’s goods trade deficit narrowed to $105.90 billion in April, from $125.90 billion in the prior month and better than the $114.80 billion deficit anticipated by economists. Exports of goods grew by $5.20 billion on a month-over-month basis to $173.90 billion in April. During the same period, imports of goods fell by $14.80 billion to $279.90 billion.
The preliminary data published by the Census Bureau also indicated that wholesale inventories grew by 2.10% m-o-m to $860.80 million in April, following a rise of 2.70% (upwardly revised from 2.30%) in March and a notch higher (the lower figure is better) than the 2.0% increase anticipated by economists. On a year-over-year basis, preliminary wholesale inventories surged 23.80% in April 2022.
Retail inventories increased 0.70% m-o-m to $696.30 million in April, following a 3% rise (upwardly revised from 2.30%) in March. On a year-over-year basis, retail inventories surged 15% in April 2022.
According to the Bureau of Economic Analysis, personal income grew by 0.40% (or $89.30 billion) m-o-m in April, following a 0.50% rise in the prior month, but a notch lower than the 0.50% growth anticipated by economists. Disposable personal income rose by 0.30% (or $48.30 billion) in April, while personal consumption expenditures (PCE) increased 0.90% (or $152.30 billion). The PCE price index rose by 0.20% m-o-m in April. Excluding food and energy, the PCE price index grew by 0.30%.
The weak economic data from both the US and Japan is expected to keep the USD/JPY pair range-bound in the short term.
The historical price chart indicates that the USD/JPY pair is declining after facing resistance at 131.20. The next support is anticipated only near 124.95. Additionally, the MACD indicator has a negative reading. Therefore, we are anticipating the currency pair to remain in a downtrend in the short term.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
