The yen remained range-bound against the greenback on Friday following the release of flat economic data from Japan and the US. While Tokyo’s core consumer price index met analysts’ estimates, the University of Michigan’s consumer sentiment index surpassed the market’s expectations. Overall, the USD/JPY pair traded in a range of between 152.23 and 154.43.
According to Japan’s Statistics Bureau operating under the Internal Affairs Ministry, the Tokyo core consumer price index, which excludes prices of volatile items such as fresh food, grew 2.20% y-o-y in July after increasing by 2.10% in the previous month. The reported reading was in line with economists’ estimates.
The increase was led primarily by a 19.70% y-o-y surge in energy prices. Notably, prices for processed food and hotels rose at a slower rate.
According to Yoshiki Shinke, senior executive economist at Dai-Ichi Life Research Institute, the data suggests that Japanese companies are having difficulty transferring increased costs to consumers, primarily due to subdued consumer spending.
BOJ Governor Kazuo Ueda has consistently emphasized that the central bank is monitoring for indications that higher salaries will stimulate consumption and drive demand-fueled price rises, thereby sustaining inflation above the 2% target. The core inflation figures were also influenced by the cessation of the Japanese government’s utility handouts in June.
Furthermore, Japan’s inflation increased by 2.20% y-o-y in July after rising by 2.30% in the previous month. Inflation, excluding fresh food and energy, grew by 1.50% in July after rising by 1.80% in June.
According to the US Bureau of Economic Analysis, the country’s income inched up 0.20% m-o-m (or $50.40 billion) in June after increasing by 0.40% in the previous month, but missed forecasts of 0.40% growth.
Disposable personal income, excluding personal current taxes, rose by 0.20% (or $37.70 billion). Also, personal consumption expenditures (PCE) grew by 0.30% (or $57.60 billion). This includes a growth of $53.10 billion in spending for services and a rise of $4.5 billion in spending for goods.
The PCE price index inched up 0.10% m-o-m in June. Excluding food and energy, the PCE price index grew by 0.20%. Personal savings stood at $703 billion in June, while the personal savings rate was 3.40%.
The University of Michigan consumer sentiment index declined to 66.40 in July from 68.20 in June, surpassing forecasts of 66.30. The initial estimates pegged the reading at 66.
The index reflecting the current economic conditions fell to 62.70 in July from 65.90 in June. Likewise, the consumer expectations index decreased to 68.80 from 69.60.
The flat economic data from both countries 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 157.40. The next level of support is anticipated to be only near 150.90. Additionally, the currency pair is trading below its 50-day moving average, while the MACD indicator is showing a negative reading. Therefore, we anticipate the USD/JPY pair to remain in a downtrend for the next few trading sessions.
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.
