USD/JPY recovers to 139.50 on Japan economic fears, PM Kishida’s defense of BoJ doves

• USD/JPY bounces off intraday low to reverse the first daily loss in three.
• Japan government cuts economic forecasts, PM Kishida advocates sustained exit from deflation.
• Mixed concerns about Fed, unimpressive yields prod Yen pair buyers.
• Japan Trade Balance improves in June, mid-tier US data eyed for fresh impulse.

USD/JPY picks up bids to reverse the early-day losses around 139.50 during the initial hour of Thursday’s European session.

The Yen pair justifies recently downbeat macros, as well as news, surrounding Japan while failing to cheer the US Dollar weakness amid a sluggish trading day so far. That said, the Japanese government recently announced a downward revision of the Asian major’s Financial Year (FY) 2023-24 growth forecasts. In doing so, the policymakers in Tokyo anticipate the FY 2023-24 growth to be at 1.3% versus the previously expected 1.5%.

On the contrary, Japan’s trade figures for June showed an upbeat Merchandise Trade Balance Total amid downbeat Imports and welcome prints of Exports.

Elsewhere, Japan Prime Minister (PM) Fumio Kishida defends the dovish concerns about the Bank of Japan (BoJ) by showing readiness to create a society where wage hikes become a norm.

It’s worth noting that the US Treasury bond yields trace mixed concerns about the Federal Reserve (Fed) despite a widely expected July rate hike. Also likely to exert downside pressure on the bond coupons is the market’s rush towards the US government bonds amid indecision.

With this in mind, US Dollar Index (DXY) remains mildly offered around 100.25 while challenging a two-day rebound from the lowest level since April 2022. In doing so, the greenback justifies the previous day’s downbeat US housing data and mixed concerns about the Fed, as well as ignores the optimism at the US banks.

Against this backdrop, the S&P500 Futures print mild losses whereas the US Treasury bond yields trade mixed at the weekly low.

Looking ahead, Friday’s Japan inflation numbers will be crucial for the USD/JPY pair traders to watch before the next week’s Federal Open Market Committee (FOMC) monetary policy meeting announcements. Ahead of that, the mid-tier US employment and housing data will join the risk catalysts to entertain the Yen pair traders.

Technical analysis

Convergence of the previous support line from late March joins the 50-Exponential Moving Average (EMA) on the daily chart to highlight 140.00-10 as the short-term key upside hurdle for the USD/JPY to cross to convince buyers.