USD/JPY takes a U-turn from 107.00 after Japan inflation data, BOJ minutes

• USD/JPY defies the previous day’s upbeat performance following the latest declines.
• Japan’s National Core CPI slipped below -0.1% forecast to reprint -0.2% in May.
• BOJ minutes suggest some policymakers discuss the need for further bond buying.
• Trading sentiment recovers, virus updates, geopolitical news and trade headlines to keep traders directed amid a light calendar.

USD/JPY drops to 106.91, after rising to 107.05, as Tokyo opens for Friday’s trading. The yen pair recently reacted to Japan’s downbeat inflation data and BOJ minutes while differing from the previous day’s recovery moves. However, the risk reset, amid hopes of further stimulus from the US, questions the bears as we write.

Japan’s National Consumer Price Index (CPI) for May matched 0.1% forecast on a YoY basis. Though, the National CPI ex-Fresh Food, mostly known as Core CPI, dipped beneath -0.1% expected to -0.20%.

Read: Japan’s Core CPI drops 0.2% YoY in May vs. -0.1% expected, USD/JPY battles 107.00

Further, the Bank of Japan’s (BOJ) minutes for the June month monetary policy meeting suggested that the policymakers are quite worried about the economic conditions and suggested the increase in bond buying. The reason cited is the coronavirus (COVID-19)-led negative impact on the world’s third-largest economy.

Read: BOJ April Minutes: Few members said should buy bonds aggressively to keep yield curve stably low

The recent recovery in the market’s risk-tone sentiment plays against the pair’s fall from 107.06. The S&P 500 Futures part ways from Wall Street benchmarks, as printing over 0.50% gains, whereas Japan’s Nikkei opens with a gain of 0.75% to 22,515 as we write. The reason could be cited by the US Democrats' $1.5 trillion infrastructure plan as well as the US and China’s readiness to keep talking on the trade deal despite having political differences. Though, the recent increase in the US virus numbers from Texas and Florida becomes a cause of concern and cap the optimism.

Looking forward, an absence of major data during the Asian session will keep the pair at the mercy of risk catalysts. As a result, trade, virus and geopolitical tension surrounding China will be the key topics for traders to watch.

Technical analysis

The pair’s ability to break a downward slopping trend line from June 08 enables the bulls to again aim for the weekly high surrounding 107.65. However, 50-day EMA near 107.70 might question the optimists afterward. Meanwhile, sellers are less interested in entries unless the pair drops below a six-week-old support line, near 106.70/65.