USD/JPY retreats towards 144.00 as Japan Retail Trade tests BoJ’s dovish bias, Fed’s Powell eyed

USD/JPY takes offers to refresh the intraday low near 144.20 as it consolidates the weekly gains at the highest levels since November 2022 during the early hours of Tokyo trading on Thursday. In doing so, the Japanese Yen (JPY) pair justifies the upbeat prints of Japan Retail Trade numbers amid lackluster trading sessions ahead of the key data/events.

Japan’s Retail Trade growth jumps to 5.7% YoY for May versus 5.4% expected and 5.1% prior (revised) whereas the seasonally adjusted figures reversed the previous contraction of 1.2% with 1.3% gain in the key statistics for the said month, versus -0.2% market forecasts.

It should be noted that the US Dollar’s retreat from the weekly high also allows the USD/JPY pair buyers to take a breather. That said, the US Dollar Index (DXY) prints mild losses near 102.90 by the press time after snapping a two-day downtrend and refreshing the weekly top the previous day.

That said, hawkish comments from Fed Chairman Jerome Powell and Bank of Japan (BoJ) Governor Kazuo Ueda’s defense of easy-money policy seemed to have propelled the USD/JPY pair prices to refresh the yearly top the previous day.

On Wednesday, in his speech at the European Central Bank (ECB) Forum on central banking, Federal Reserve (Fed) Chairman Jerome Powell said, “We believe there's more restriction coming, driven by the labor market.” The policymaker also ruled out the economic downturn as the most likely case.

On the other hand, Bank of Japan (BoJ) Governor Kazuo Ueda defended the dovish bias while saying, “(There is) still some distance to go in sustainably achieving 2% inflation accompanied by sufficient wage growth.” BoJ Governor Ueda also added that the Japanese economy is going to expand slightly above potential for some time.

Against this backdrop, S&P500 Futures print mild gains even after Wall Street closed mixed and yields remained sidelined after falling the previous day.

Moving on, Japan’s Consumer Confidence for June, expected 36.2 versus 36.0 prior, precedes Federal Reserve Chairman Jerome Powell’s speech in Madrid to direct intraday moves of the USD/JPY pair. also important to watch will be the revised version of the US Gross Domestic Product (GDP) for the first quarter (Q1) 2023 and second-tier employment data.

Technical analysis

Despite the latest pullback, favored by the overbought RSI (14) line, the USD/JPY pair remains within a fortnight-old bullish channel, currently between 143.85 and 145.50, which in turn keeps the Yen pair buyers hopeful.