USD/JPY still sub-109.00 handle as US inflation data fails to impress USD bulls

• The US core Personal Consumption Expenditure (PCE) price index year-on-year to April matched analysts expectations at 1.8%. The USD/JPY bulls are unimpressed by the inflation data.
• Investors focus is shifting to the Non-farm Payrolls data for May as well as the Average Hourly Earnings (wage’s growth) which are both scheduled for Friday at 12:30 GMT.   

The USD/JPY currency pair found buyers near the 108.55 level in the Asian and early European session. The pair is in its third day of consolidation after losing about 320 pips in the last two weeks.The USD/JPY is currently trading at 108.80 down 0.10% on Thursday.

Freshly released the US core Personal Consumption Expenditure (PCE) price index rose 1.8% y/y, meeting the market expectations. The USD/JPY had no major reaction to the data  with the US Dollar bulls slightly disappointed as the Federal Reserve Bank is targeting 2% inflation in order to raise interest rates. 

In fact, the US Dollar Index (DXY) gained almost 7% since mid-April on the expectation of the Federal Reserve three rate hikes in 2018. However, DXY has found some solid resistance at the 95.00 handle as Wednesday US PCE for the first quarter and the Gross Domestic Product came slightly below estimates which prompted some profit-taking.

Traders are now going to focus on the release of the Nonfarm Payrolls data for May as well as the Average Hourly Earnings (wage’s growth) which are both scheduled on Friday at 12:30 GMT. Traders should expect high volatility as the NFP is one the most important macroeconomic indicator in the US. 

The safe-haven Yen has been gaining strength of late due to geopolitical tensions with the US-China trade war, US-North Korea summit cancellations and issues in Italy which is struggling to form a government. Also the US getting reading to impose the trade tariffs on steel and aluminum imports from EU is also seen as a risk for markets as trade war generally hamper the global economy as a whole.

USD/JPY 4-hour chart 

The trend is neutral to bearish as USD/JPY is trading below its 200-period simple moving average on the 4-hour time-frame. Investors will likely find support at the 108.53 swing low and at the 108.10 cyclical low while to the upside 109.09 swing, the 109.50 supply level and the 110.00 should act as resistance.