USD/JPY pokes 145.80 technical support on hawkish BoJ concerns, focus on Fed inflation cues

• USD/JPY reverses the previous day’s rebound from weekly low, prods three-week-old rising support line.
• BoJ’s Nakamura confirms government updates announcing victory over deflation.
• Japan official flagged economic fears via downbeat industrial production forecasts but expects improvement in August.
• Disappointing run of US data advocates Fed policy pivot but confirmation needed from US Core PCE Price Index, NFP.

USD/JPY sellers return to the table, after a brief absence the previous day, as market players expect the Bank of Japan’s (BoJ) exit from the ultra-easy monetary policies. That said, the Yen pair drops to 145.80 as it reverses the previous day’s rebound from a three-week-old ascending support line amid very early Thursday morning in Europe.

It’s worth noting that the latest comments from BoJ Board Member Toyoaki Nakamura renew the hawkish concerns about the BoJ and weigh on the USD/JPY price, especially amid the growing acceptance of the Federal Reserve’s (Fed) policy pivot. “Japan's economy is no longer in deflation but the deflationary mindset is yet to be eradicated,” said BoJ’s Nakamura.

Apart from the hawkish BoJ concerns, mixed comments from Japan’s government officials about the industrial production conditions also seem to have exerted downside pressure on the USD/JPY price. “Japan government official stated that the factory output in August has undershot risk due to global economic downturn,” reported Reuters.

Elsewhere, US Dollar Index (DXY) remains pressured at 103.10, poking the 200-DMA support while struggling to defend the previous three-day losing streak. That said, the S&P 500 Futures struggle to track Wall Street’s gains amid a cautious mood ahead of the key US data. However, the benchmark US 10-year Treasury bond yields remain pressured at the lowest levels in three weeks, around 4.11% by the press time.

It should noted that the disappointment from initial signals of Friday’s Nonfarm Payrolls (NFP) also lured the USD/JPY bears as the ADP Employment Change dropped to 177K compared to 195K market forecasts and 371K previous readings (revised from 324K). On the same line, the second readings of the US second quarter (Q2) Gross Domestic Product (GDP) Annualized declined to 2.1% from 2.4% initial forecasts while the GDP Price Index also eased to 2.0% versus the first readings of 2.2%. Further, the preliminary readings of the Personal Consumption Expenditures (PCE) Prices also edged lower to 2.5% from 2.6% prior estimations for the said period.

Previously, the US Consumer Confidence and activity data, as well as the housing market numbers, favored dovish calls about the US central bank and weighed on the US Dollar.

Looking ahead, the Fed’s preferred inflation gauge, namely the US Core Personal Consumption Expenditure (PCE) Price Index for August, will be crucial to aptly predict the USD/JPY Price moves. That said, the US Core PCE Price Index for August, expected to remain unchanged at 0.2% MoM but edge higher to 4.2% YoY from 4.1% prior, will be important to watch for intraday directions amid the Fed policy pivot concerns.

Technical analysis

A three-week-old rising support line, close to 145.80 by the press time, restricts the immediate downside of the USD/JPY pair but the recovery will be elusive unless the quote stays below 146.50.