USD/JPY retreats towards 133.50 as Japan trade data, BoJ concerns battle with Fed bets

• USD/JPY consolidates recent gains at the six-week high, snaps three-day uptrend.
• Japan trade deficit for January improves as imports ease, exports grow.
• US Treasury bond yields refresh multi-day top as US data propel hawkish Fed bets.
• BoJ concerns remain upbeat as well amid more hawks in new leadership board.

USD/JPY takes offers to refresh intraday low while paring the recent gains around the highest levels in 1.5 months, down 0.25% on a day near 133.80 as Tokyo opens for Thursday. In doing so, the Yen pair prints the first daily loss in four amid upbeat Japanese trade data and fresh calls for hawkish moves from the Bank of Japan (BoJ). Even so, the hawkish concerns surrounding the Federal Reserve (Fed) join strong Treasury bond yields to keep the buyers hopeful.

As per the latest Japan Merchandise Trade Balance Total for January, the trade deficit improved to ¥-3,496.6B versus ¥-3,871.5B expected and ¥-1,451.8B prior (revised). The details suggest that Exports grew 3.5% versus 0.8% expected and 11.5% previous readings while the Imports eased to 17.8% versus 18.4% market forecasts and 20.7% prior. Elsewhere, Japan’s Machinery Orders rose by 1.6% MoM versus 3.0% expected and -8.3% prior.

Elsewhere, concerns surrounding the Bank of Japan’s (BoJ) exit from the Yield Curve Control (YCC) policy gained momentum of late as the nominated BoJ Leader Kazuo Ueda has a  market impression as the policy hawks.

On the other hand, the US 10-year Treasury bond yields seesaw around a six-week high, marked the previous day, while the US Dollar Index (DXY) bulls take a breather after rising to a 1.5-month top as the key US data hints at a further increase in the Federal Reserve’s (Fed) interest rates. That said, the market’s bets on the Fed’s next moves, as per the FEDWATCH tool of Reuters, suggest that the US central bank rates are to peak in July around 5.25% versus the December Federal Reserve prediction of 5.10% top rate.

On Wednesday, US Retail Sales growth jumped to 3.0% YoY in January versus 1.8% expected and -1.1% prior. Further, The Retail Sales ex-Autos grew by 2.3% in the same period, compared to analysts' estimate of +0.8%. On the same line, the NY Empire State Manufacturing Index for February improved to a three-month high of -5.8 versus -18.0 expected and -32.9 market forecasts. Alternatively, the US Industrial Production marked 0.0% MoM figures for January, compared to analysts’ estimate of 0.5% and -0.7% previous readings, but failed to push back the hawkish bias surrounding the Federal Reserve’s (Fed) next move.

Against this backdrop, Wall Street benchmarks closed with mild gains, following the day-end recovery, but S&P 500 Futures hesitate in following suit. It should be noted that Japan’s Nikkei 225 begins the day on a positive side.

Moving on, risk catalysts and the second-tier US data concerning the housing market, industrial activity and producer prices will be eyed for clear directions but major attention will be given to the central bank chatters.

Technical analysis

A convergence of the one-month-old previous resistance line and the 200-day Exponential Moving Average (EMA), highlights 133.75 as the short-term key support for the USD/JPY traders to watch.