USD/JPY extends its loss above 145.00 amid USD weakness

• USD/JPY loses momentum below mid-145.00s, retracing from a Year-To-Date (YTD) high of 146.56.
• The Japanese National Consumer Price Index (CPI) for July YoY, came in at 3.3%, above 2.5% expected.
• The robust US labor data strengthen the case for another interest rate rise by the Federal Reserve (Fed).

The USD/JPY pair loses its traction below mid-145.00s heading into the early European session on Friday. The upbeat Japanese data supports the Japanese Yen against its rivals. The major pair retraces from a Year-To-Date (YTD) high of 146.56 and currently trades near 145.18, losing 0.45% on the day.

The Japanese National Consumer Price Index (CPI) for July YoY, released by the Statistics Bureau on Friday, came in at 3.3%, above market expectations of 2.5%. Meanwhile, the National CPI excluding fresh food and energy increased to 4.3% from 4.2%, in line with market expectations of 3.1% YoY. It’s worth noting that the Bank of Japan (BoJ) keeps policy ultra-loose monetary policy while enabling the 10-year bond yield cap to move more flexible. The monetary policy divergence between the BoJ and Fed might exert pressure on the Japanese Yen against its major rivals and could be a headwind for the USD/JPY pair.

On the other hand, the number of unemployment claims fell for the week ending on August 12, indicating that the labor market remains tight. The number of US jobless claims declined to 239K for the week ending on August 12. The figure came in slightly below the market expectation of 240K, the US Bureau of Labour Statistics (BLS) reported on Thursday. Meanwhile, the Continuing Jobless Claims rose to 1.716 million. Finally, the Philadelphia Federal Reserve's Manufacturing Survey for August improved to 12, above the market consensus of -10 and -12 prior.

The US data strengthen the case for another interest rate rise by the Federal Reserve (Fed). FOMC Minutes emphasized on Wednesday that inflation remained unacceptably high and additional monetary policy tightening may be required to bring inflation to the target.

Looking ahead, the USD/JPY pair remains at the mercy of USD price dynamics due to the lack of economic data release from both the US and Japan. Investors will continue to monitor news about China's debt crisis, which might dampen risk appetite.