USD/JPY snaps two-days of gains, creeps to 137.30s on upbeat mood

• The Japanese yen appreciated sharply against the greenback, more than 0.60%.
• Worse than expected, US data begins to anticipate a recession.
• The Bank of Japan (BoJ) kept rates unchanged and pledged to its ultra-loose monetary policy stance.

The USD/JPY plunges as Wall Street Thursday’s session ends, with equities registering decent gains as sentiment improved since the mid-North American session, despite high inflation and growing concerns of a global recession. However, instead of boosting the greenback, the Japanese yen strengthened and trimmed weekly losses amidst an upbeat market mood.

The USD/JPY is trading at 137.39, down 0.56%. The major began trading around the 138.00 area but rallied towards the bottom trendline of a daily chart ascending wedge near 138.87, tumbling afterward as the greenback and US Treasury yields plunged. That said, the USD/JPY hit the daily low at 137.37.

US data missed estimations, a headwind for the USD/JPY

In the New York session, US sensitive economic data show the slowdown in the US labor market. Firstly, Initial Jobless Claims rose 251K, most than the 240K estimate, the highest in 8 months. Also, the Philadelphia Fed Manufacturing Index for June tumbled to -12.3, its lowest level since 1979, while the Conference Board dropped -0.8% MoM, more than the -0.5% estimated.

Elsewhere, the US Dollar Index fell 0.41% to 106.598, undermined by dropping US Treasury yields. The US 10-year Treasury yield sank 15 bps, from 3.028% to 2.877%, a headwind for the USD/JPY.

On Thursday Asian session, the Bank of Japan decided to leave rates unchanged and maintained its Yield Curve Control (YCC) in the 10-year JGB bond at around 0%. Further, the central bank raised forecasts for inflation while noting that growing risks are skewed to the downside.

What to watch

The Japanese economic docket will feature inflation figures alongside Jibun Bank Manufacturing and Services PMIs. On the US front, the S&P Global Services, Manufacturing, and Composite PMIs would shed some clues about the current status of the US economy.

Also read: USD/JPY Price Analysis: Stumbles below 138.00 on RSI negative divergence

USD/JPY Key Technical Levels