USD/JPY ignores downbeat Japan PPI, BoJ’s Wakatabe to drop toward 139.00, focus on US inflation, Fed

• USD/JPY takes offers to refresh intraday low, pares the previous day’s corrective bounce off weekly bottom.
• Japan PPI for May disappoints, BoJ’s Wakatabe rules out monetary policy action at this week’s meeting.
• Yields retreat amid pre-Fed anxiety, US inflation will be the key to confirm no rate hike from FOMC.
• Fed, BoJ inaction may allow Yen pair to continue grinding towards the north.

USD/JPY consolidates the previous day’s gains with mild losses around 139.30 as Tokyo opens for Monday. In doing so, the Yen pair portrays the market’s cautious mood ahead of the top-tier data/events comprising this week’s monetary policy meeting from the Bank of Japan (BoJ) and the US Federal Reserve (Fed), not to forget the US inflation data.

It’s worth noting that the risk-barometer pair’s latest downbeat performance fails to justify disappointing inflation clues from Japan, as well as dovish comments from the BoJ official.

That said, Japan’s Producer Price Index (PPI) for May dropped for the fifth consecutive month to 5.1% YoY from 5.8% previous readings and 5.5% market forecasts. That said, monthly figures also disappointed Yen traders with -0.7% MoM outcome, versus -0.2% expected and 0.2% prior.

On the other hand, BoJ Deputy Governor Masazumi Wakatabe rules out any change in the BoJ monetary policy during this week’s meeting as he said, “Don't expect a change from BOJ at this week's meeting.”

Elsewhere, the the US Dollar Index (DXY) dropped in the last two consecutive weeks, indecisive around 103.56 at the latest, as downbeat prints of the US activity numbers for May joined disappointing employment clues to weigh on the US Dollar. That said, the latest United States Initial Jobless Claims jumped to the highest levels since September 2021 whereas the US ISM Services PMI, S&P Global PMIs and Factory Orders also printed softer outcomes for May and pushed back the Fed hawks, which in turn weighed the US Dollar.

Amid these plays, US Treasury bond yields struggle to extend the previous week’s upward trajectory while S&P500 Futures manage to trace Wall Street’s gains, which in turn should put a floor under the USD/JPY pair due to the quote’s risk-barometer status.

Moving on, a light calendar on Monday may restrict intraday moves of the USD/JPY pair. However, Tuesday’s US inflation will be the key for the Yen pair traders to watch for clear directions. That said, the BoJ and the Fed are both expected to keep the monetary policy unchanged but the odds of the Fed’s hawkish pause are high and hence can recall the USD/JPY bulls in a case where Jerome Powell either surprises markets or defends hawkish bias.

Technical analysis

A two-week-old symmetrical triangle restricts immediate USD/JPY moves between 140.00 and 138.85.