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USDJPY Pair Edges Higher on Upbeat US PCE Data and Weak Yen

Simon Mugo trader
Updated 31 May 2023

The USDJPY currency pair was trading up over 20 pips at writing as the dollar remained stronger than the yen, but only by a slight margin. The pair struggled to make gains as the yen fought to end the week flat against its safe-haven peer the US dollar .


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The release of upbeat Japanese core CPI, which came in at 3.2% beating analysts’ consensus estimates of 3.4%, also aided the yen and helped limit the pair’s rally. Still, the US dollar was the stronger one of the two currencies. 

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YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY

The upbeat US Personal Consumption Expenditure (PCE) data released in the North American session also lifted the currency pair. The pair was rising, driven by the divergence between the Bank of Japan and the US Federal Reserve in terms of monetary policy. 

The US core PCE came in at 0.4% beating consensus estimates of 0.3% and the previous figure of 0.3%. The US dollar edged higher after the Bureau of Economic Analysis (BEA) reported the PCE figures as the annualised rate rose to 4.4% against expectations of a drop to 3.9% from the 4.2% figure registered in March. 

The annualised core PCE price index, preferred by the Fed, increased to 4.7% from the 4.6% previous figure beating analysts’ estimates. The higher PCE figures could lead to another rate hike from the Fed. 

According to a note from analysts at Societe Generale, “USD/JPY broke out above the upper end of its range since December and has achieved the earlier highlighted target of 140.30 representing projections. An initial pullback is not ruled out. However, the 200-DMA near 138/137.20 should be an important support zone. Defending this can lead to continuation in up move.”

the data confirmed analyst expectations that the Federal Reserve (Fed) would keep interest rates higher for longer, which supports the Greenback and acts as a tailwind for the USD/JPY pair. In fact, the markets are now pricing in over a 50% chance of another 25 bps lift-off at the June FOMC meeting.

USDJPY 

The USDJPY currency pair traded up 19.1 pips (0.14%) as it reached new yearly highs. 


YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.


Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading