Yen falls to 2-week low on US jobless claims

The Japanese yen is under pressure, as USD/JPY has posted gains for a second straight day. In North American trade, USD/JPY is trading at 109.86, up 0.66%.

Tokyo Core CPI eyed

Inflation levels remain at very low levels in Japan, and with the economic downturn due to Covid, there is little reason to expect that this will change anytime soon. Earlier in the week, BoJ Core CPI, the Bank of Japan’s preferred gauge of inflation, dipped to -0.1% in March, down from zero a month earlier. The index has mustered just one gain in the past 13 months.

We’ll get another look at inflation, with the release of Tokyo Core CPI ( 23:30 GMT). The indicator has reeled off nine consecutive declines, and the consensus for April stands at -0.2%.

In the US, second-estimate GDP came in at 6.4%, shy of the estimate of 6.5%. A strong jobless claims report has helped boost USD/JPY. Last week, jobless claims fell to 406 thousand, down from 444 thousand and below the forecast of 425 thousand.

The week wraps up with inflation data, with the release of Core PCE Price Index for April on Friday. PCE, which is the Federal Reserve’s preferred inflation gauge, is expected to rise to 2.9% YoY, up from 1.8% in the previous release. With the market still nervous about higher inflation, despite Fed assurances, a higher reading than the consensus could renew investors’ concerns about higher inflation.

The market continues to carefully monitor comments from Fed members, and investors detected a subtle shift in tone from Fed member Randal Quarles, who stated on Wednesday that he is open to the Fed having a discussion about tapering its QE programme. Earlier in the week, Fed member James Bullard said that the Fed was not yet ready to engage in a taper talk, but said that the Fed might reach that point in three month’s time.

USD/JPY Technical

• USD/JPY is putting strong pressure on resistance at 109.94. Above, there is resistance at 110.37
•  On the downside, there is support at 108.51 and 108.08

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