USD/JPY slips beneath 136.00 on upbeat Japan Retail Trade, softer yields, focus on Fed’s Powell

• USD/JPY takes offers to refresh daily lows, snaps three-day uptrend around weekly top.
• Japan Retail Trade rose past market expectations and previous readings in May.
• Yields remain pressured for the second day amid recession/inflation fears, BOJ’s Kuroda reiterates support for easy money policies.
• US data, Fed Chair Powell’s appearance at ECB Forum are important catalysts for fresh impulse.

USD/JPY consolidates weekly gains during Wednesday’s sluggish Asian session, refreshing intraday low around 135.90 by the press time. In doing so, the yen pair snaps a three-day uptrend around a one-week high. The quote’s latest weakness could be linked to the strong retail trade data from Japan, as well as downbeat Treasury yields.

Japan Retail Trade for May rose to 3.6% YoY versus 3.3% expected and 3.1% upwardly revised prior. The Large Retailer Sales rallied by 8.5% compared to 1.3% expected and 4.0% prior.

On the other hand, the market’s indecision over the economic stand, as well as the fears of inflation, joins the hawkish Fedspeak to weigh on the US Treasury yields, which in turn drown the USD/JPY prices of late. That said, the US 10-year Treasury yields drop for the second consecutive day to 3.157% whereas the S&P 500 Futures print mild losses by the press time.

A jump in the one-year US consumer inflation expectations joined hawkish Fedspeak to renew the fears of faster Fed rate hikes. To talk about the data, the US Conference Board (CB) Consumer Confidence Index dropped for the second consecutive month in June, to 98.7 versus 100.0 expected and 103.2 in May. In doing so, the widely followed consumer sentiment gauge dropped to the lowest level since February 2021. Further details revealed that the one-year consumer inflation rate expectations climbed to 8% from May's revised print of 7.5. It should be noted that the US trade deficit dropped to the lowest in a year, to $104.3 billion, per the latest release for May.

Elsewhere, the Group of Seven (G7) nations announced restrictions on Russian oil prices while the North Atlantic Treaty Organization (NATO) meeting signals not a welcome environment for China. Furthermore, US Deputy Commerce Secretary Don Graves said, “A clear US response on China tariffs is coming soon,” per Bloomberg TV, which in turn raises fears of the fresh Sino-American tussles.

Other than what’s already mentioned above, recent comments from Bank of Japan (BOJ) Governor Haruhiko Kuroda also weigh on the USD/JPY prices. “Unlike other economies, the Japanese economy has not been much affected by the global inflationary trend so monetary policy will continue to be accommodative,” said BOJ’s Kuroda.

Looking forward, the US Core Personal Consumption Expenditure (PCE) for Q1 2022, expected to remain unchanged at 5.1%, will be important. On the same line will be the final readings of the US Q1 GDP, which is likely to confirm a 1.5% Annualized contraction. Above all, the central bankers’ discussions at the ECB Forum will be the key for the market players to watch for clear directions.

Technical analysis

A clear upside break of the weekly resistance line and successful trading beyond the 10-DMA, respectively around 134.75 and 135.30, propels USD/JPY towards a monthly peak of 136.75.