USD/JPY bounces off six-week low above 134.00 on mixed Japan data, US PCE inflation eyed

• USD/JPY pares the biggest daily fall in eight months.
• BOJ Summary of Opinions hint at economic risk, Japan Unemployment increased but Retail Sales eased.
• Pause in the US Treasury yields’ south-run, sluggish session favor corrective pullback.
• US policymakers try to ward off “technical recession” ahead of Fed’s preferred inflation gauge.

USD/JPY licks its wounds near 134.50 as it seesaws near the 1.5-month low during Friday’s Asian session. In doing so, the yen pair consolidates the heaviest daily fall since late November 2021.

A corrective pullback in the US Treasury yields, after refreshing the multi-day low, joins the mixed catalysts from Japan to trigger the USD/JPY pair’s rebound of late.

That said, the US 10-year Treasury yields seesaw around 2.67%, the lowest levels since early April, whereas the 2-year bond coupons remain pressured at the three-week low, down 0.14% intraday around 2.86% at the latest.

Elsewhere, Bank of Japan’s (BOJ) Summary of Opinions repeated regular defense for the easy money but cited economic risks and weighed on the Japanese yen (JPY). On the same line could be the mixed data from the Asian major.

Japan’s Tokyo Consumer Price Index (CPI) rose to 2.5% in July while Industrial Production for June also impressed optimists with 8.9% MoM growth. However, downbeat prints of Retail Sales and the Unemployment Rate for June seem to have weighed on the JPY.

Talking about the sentiment, S&P 500 Futures rise half a percent to seesaws near the highest levels since early June, which in turn favor USD/JPY buyers.

It should be observed that the US policymaker’s struggle to ward off the recession fears joins a cautious mood ahead of the US Core Personal Consumption Expenditure (PCE) Price Index for July to test the optimists. Also keeping traders on the edge are the US inflation expectations data, as per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED). The US inflation expectations refreshed the monthly high to 2.48% and renewed fears of higher Fed rates late Thursday.

Technical analysis

Although late June’s low around 134.20 restricts the immediate downside of the USD/JPY prices, recovery remains elusive until the quote stays below the previous support line from March, around 135.75 by the press time.