USD/JPY regains 143.00 amid sluggish yields, Japan’s record deficit, US Retail Sales eyed

• USD/JPY picks up bids to reverse the previous day’s losses amid an inactive session.
• Japan reports record trade deficit in August, Foreign Investments in Japan Stocks improved.
• Policymakers resist accepting market calls for BOJ intervention, yields remain sidelined despite hawkish Fed bets.

USD/JPY picks up bids to refresh intraday high around 143.35 during Thursday’s Asian session. In doing so, the yen pair portrays the market’s rush towards the US dollar amid a lack of clarity and before the key US Retail Sales data for August. With this, the quote ignores the bond market's inaction.

It should be noted that the mixed bunch of Japanese data also challenges the USD/JPY but keeps the buyers hopeful. “Japan ran its biggest single-month trade deficit on record in August as imports surged on high energy costs and a slump in the yen, exposing the economy's vulnerability to external price pressures,” mentioned Reuters. As per the news, Japan’s trade gap marked the 13th consecutive month of year-on-year shortfalls and was bigger than the 2.3982 trillion yen deficit expected in a Reuters poll. Alternatively, Foreign Investments in Japan Stocks improved to ¥-609.7B from revised up prior figures of ¥-703.7B.

The reason could also be linked to the Japanese policymakers’ rejection that the government and the Bank of Japan (BOJ) intervened to defend the national currency the previous day. Also keeping the USD/JPY buyers hopeful are the mixed bunch of catalysts that together suggest a lack of optimism.

US President Joe Biden’s rejection of US fears and China’s stimulus are some of the key developments that should have favored the risk appetite. However, the Sino-American tussles and the energy crisis in Europe seemed to have challenged the optimism. It’s worth noting that the looming labor strike in the US appears an extra burden on the risk appetite.

On the same line, the 75% chance of the Fed’s 75 basis points (bps) rate hike in the next week, as well as the 25% odds favoring the full 100 bps Fed rate lift, as per the CME’s FedWatch Tool, favor the DXY bulls.

Talking about the data, US Producer Price Index (PPI) declined to 8.7% YoY in August from 9.8% in July, versus 8.8% market forecasts. Details suggest that the PPI ex Food & Energy, better known as Core PPI, also eased to 7.3% YoY from 7.6% but surpassed the market expectation of 7.1%.

While portraying the mood, the S&P 500 Futures print mild gains around 3,670 whereas the US 10-year Treasury yields remain directionless near 3.416%.

Moving on, talks surrounding Japan’s market intervention and yields will be important ahead of the US Retail Sales for August, expected to remain unchanged at 0.0%.

Technical analysis

USD/JPY marks another rebound from the 10-DMA, around 142.75 by the press time, which in turn joins firmer RSI and the bullish MACD signals to keep buyers hopeful of refreshing the multi-year high marked in September, close to 145.00.