USD/JPY rebounds amid cooling US inflation, eyeing the 150.00 mark

• USD/JPY recovers to around 149.40, gaining 0.12%, after US Core PCE data reveals a 3.9% YoY increase, below the anticipated 4%.
• Dovish stance from the Bank of Japan and intervention threats in Forex markets hint at justified further weakness in the Japanese Yen.
• Despite the rebound, intervention threats and contrasting statements from Japanese authorities may deter buyers from fresh long positions.

The US Dollar (USD) stages a recovery against the Japanese Yen (JPY) in the mid-North American session, reclaiming the 149.00 figure after dipping towards the 148.52 daily low during the Asian and European session. Nevertheless, bounced off the lows and hovers at around 149.40s, gaining 0.12%.

US Dollar regains strength against the Japanese Yen, as lower-than-expected US inflation data and a dovish Bank of Japan set the stage for potential further advances

Data revealed from the United States (US) showed inflation is cooling, as August´s Core Personal Consumption Expenditures (PCE), the US Federal Reserve (Fed) preferred gauge for inflation, expanded by 3.9% YoY, below estimates of 4%. At the same time, headline inflation grew by 3.5% YoY as expected, above July’s 3.4%.

Even though the latest Fed officials had stressed that further tightening is needed, other policymakers are taking a cautious approach. Meanwhile, expectations for a rate hike in November lowered as shown by the CME FedWatch Tool,

Other data revealed the University of Michigan (UoM) showed that Consumer Sentiment for September's final reading deteriorated, while inflation expectations ticked up to 3.2% from 3.1% for one year. Americans see inflation at 2.8% on a five-year horizon, up from 2.7%.

On the Japanese front, intervention threats in the Forex markets continued, though contradicting what Japanese authorities said regarding that moves should be justified by fundamentals. Consequently, the dovish stance of the Bank of Japan (BoJ) suggests further JPY weakness is justified. This week, BoJ Governor Kazuo Ueda cited that discussing an exit from the ultra-loose monetary policy would be premature as inflation above 2% is not governed by wage growth.

On Thursday, Japanese Finance Minister Shunichi Suzuki reiterated that he won't rule out any steps to respond if there's excessive FX volatility. He added that authority is closely watching FX's moves with a sense of urgency.

Given the fundamental backdrop, the USD/JPY could test the 150.00 mark, but intervention threats, might refrain buyers from opening fresh long positions.

USD/JPY Key Technical Levels