USD/JPY traces corrective bounce in yields to aim for 146.00 on downbeat Japan data ahead of US NFP

• USD/JPY picks up bids to refresh intraday high but stays on the way to snapping four-week uptrend.
• Japan Jibun Bank Manufacturing PMI eases, Capex growth slows but corporate earnings refreshed record high.
• US Dollar consolidates weekly loss ahead of employment details for August.
• Strong US NFP becomes necessary to defend Yen pair buyers as Fed policy pivot, BoJ’s exit from ultra-easy policy loom.

USD/JPY refreshes intraday high to 145.70 as it pares the first weekly loss in five on the US NFP day. Apart from the pre-data consolidation, the Yen pair also justifies the downbeat Japan data, as well trace a rebound in the Treasury bond yields.

That said, Japan’s Jibun Bank Manufacturing PMI for August eases to 49.6 from 49.7 initial estimations. Further, the nation’s Capital Spending for the second quarter (Q2) drops the most since early 2022,  to 4.5% versus 5.4% expected and 11.0% prior. Further, the Japan Ministry of Finance (MoF) also said that Japanese corporations marked record internal reserves and recurring profits in Q2 of 2023.

It’s worth noting Reuters cites China's growth slowdown and higher costs in Tokyo as the key catalysts for the recently downbeat Japan data.

Elsewhere, the US economic calendar flashed slightly better data on Thursday, after witnessing the downbeat prints of consumer confidence and employment clues earlier in the week, which in turn allowed the US Dollar to pare weekly losses.

That said, the US Federal Reserve’s preferred inflation gauge, namely the US Core Personal Consumption Expenditure (PCE) Price Index for August, matched market forecasts of 4.2% YoY and 0.2% MoM versus 4.1% and 0.2% respectively priors. Further, the Initial Jobless Claims dropped to 228K from 232K prior (revised) versus 235K market forecasts while the Chicago Purchasing Managers’ Index rose to 48.7 for August compared to 44.1 expected and 42.8 previous readings. Additionally, Personal Spending rose past the 0.6% expected and previous readings to 0.8% for July whereas Personal Income eased to 0.2% for the said month, from the 0.3% market forecast and prior.

Additionally, Atlanta Fed President Raphael Bostic defended the US central bank’s view of keeping rates high also underpinned the US Dollar’s rebound, recently favoring the USD/JPY as well.

On a different page, a slew of China measures to renew growth momentum struggles to lift the sentiment amid the pre-data anxiety.

Against this backdrop, the US 10-year and two-year Treasury bond yields remain depressed around the lowest level in three weeks while the US stock futures dwindle after a mixed Wall Street close.

Moving on, the US employment report for August comprising the top-tier Nonfarm Payrolls (NFP) and US ISM Manufacturing PMI will be crucial to watch.

Forecasts suggest 170K figures of the Nonfarm Payrolls (NFP) versus the previously upbeat outcomes of the JOLTS Job Openings, ADP Employment Change and higher prints of the US Continuing Jobless Claims. Additionally, the three-month average of the US NFP halves to 218K versus a year earlier. As a result, the overall scenario of the US job numbers appears downbeat and can only defend the USD/JPY by posting an extremely strong outcome, especially amid the hawkish bias about the Bank of Japan (BoJ).

Technical Analysis

USD/JPY recovery looks to a two-month-old ascending resistance line, around 147.00 by the press time. That said, the pair sellers remain off the table unless they witness a daily closing below 146.60–50 region.