The US dollar declined against the yen yesterday following the release of lower-than-anticipated US inflation data for June. The slowest increase in annual inflation in more than two years has given rise to expectations of a temporary end to the US Fed’s monetary tightening cycle. The Japanese economic data was not impressive. However, the markets were totally focused on the US inflation data. This paved the way for the USD/JPY pair to decline from a high of 140.40 to a low of 138.77 in the past 24 hours.
According to Japan’s Cabinet Office, the country’s core machinery orders fell by 7.60% m-o-m in May following an increase of 5.50% in the previous month, disappointing economists who were expecting a 0.90% growth in core machinery orders.
The manufacturing sector posted an increase in private capital investment of 3.20% in May. On the contrary, the non-manufacturing sector recorded a sharp 19.40% decline in private capital investment.
On a y-o-y basis, private-sector machinery orders fell by 8.70% in May 2023, following a 5.90% decline in April and breaching forecasts of a 0.20% decline.
According to the Bank of Japan, the country’s producer price index rose by 4.10% y-o-y in June, following an increase of 5.20% in May and missing forecasts of 4.30% growth. The reported figure reflects the lowest level since April 2021 against the backdrop of worldwide inflationary pressures.
The PPI of transportation equipment rose by 3.20% y-o-y in June. Likewise, beverages and foods grew by 7.40%. While iron and steel posted a rise of 7.80%, metal products recorded a surge of 9.40%. Production and electrical machinery reported an increase of 3.30% and 5.60%, respectively. On the contrary, the producer price index fell by 3.80% for chemicals and related goods. Similarly, petroleum and coal products posted a decline of 2.60%.
On a m-o-m basis, producer prices inched down by 0.20% in June, reflecting the second successive monthly decline, following a 0.70% decrease in May. While the export price index decreased by 0.60% m-o-m in June, the import price index fell by 3.10% in the same period.
According to the US Bureau of Labor Statistics, the consumer price index inched up 0.20% m-o-m in June, following an increase of 0.10% in May and a notch lower than the 0.30% rise anticipated by economists.
The food index rose by 0.10% m-o-m in June, following a rise of 0.20% in May. However, the index for food at home remained unchanged in June, compared with the previous month. The index for food away from home grew by 0.40% in June. Likewise, the energy index inched up 0.60% in June.
Excluding food and energy, the US core CPI grew by 0.20% m-o-m in June, following a 0.40% rise in May and a notch lower than the 0.30% growth forecast by economists. The reported figure reflects the smallest one-month rise since August 2021.
On a y-o-y basis, the US consumer price index rose by 3% in June. Economists had anticipated an annual inflation of 3.10%. In May, the CPI grew by 4%. The reported figure reflects the smallest 12-month increase since March 2021.
The energy index plunged 16.70% y-o-y in June while the food index increased 5.70% in the same period. Excluding the food and energy index, the US core CPI surged by 4.80% year-on-year in June.
The lower-than-anticipated US inflation has given rise to expectations for a temporary end to the monetary tightening process by the Federal Reserve. This turned the greenback slightly weak against its peers including the yen.
Technically, the USD/JPY pair is declining after facing resistance at 142. The next major support is anticipated only near 137.75. Additionally, the currency pair is trading below its 50-day moving average while the stochastic indicator is in the bearish zone. Therefore, we anticipate the USD/JPY 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.
