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Last week, the Bank of Japan left interest rates unchanged as widely expected, and said it would maintain the current pace of Japanese government bond purchases.

However, the BOJ added that it will release a plan to reduce its bond-buying program at its next policy meeting in July. Also, BOJ Governor Kazuo Ueda warned that currency movements have a significant impact on the economy and prices, a notable change from previous comments that a weak yen has little impact on inflation.

According to currency trading platforms, the Japanese yen fell sharply and approached its lowest levels in three decades after the decision. This was before reducing those losses as market participants shifted their focus to the expected reduction in bond purchases and the possibility of further currency intervention.

On the economic calendar data front, the University of Michigan’s US Consumer Confidence Index published its preliminary readings for June 2024. Its reading came after a one-year inflation reading of 3.5% for May 2024, the highest inflation reading the index has recorded since November 2023. Furthermore, inflation expectations for the coming year were unchanged this month at 3.3%, above the 2.3-3.0% range seen in the two years prior to the pandemic.

However, long-term inflation expectations rose from 3.0% last month to 3.1% this month. The June reading should be interpreted as essentially unchanged from May. Moreover, long-term inflation expectations have been remarkably stable over the past three years but remain elevated compared to the 2.2-2.6% range seen in the two years before the pandemic, said Joanne Hsu, director of consumer surveys.

Consumer sentiment was little changed in June; the month’s reading was a statistically insignificant 3.5 points lower than in May and within the margin of error. That means sentiment is about 31% higher than its June 2022 low amid rising inflation. Today’s consumer confidence reading came in at 65.6 for the June preliminary reading — well below expectations and from last month. Recently, the previous reading for the index was 67.4 for the May preliminary reading. Overall, analysts had expected a reading of around 72 for June, up from April’s reading of 69.1. That means today’s reading was well below market expectations for the month.

The monthly readings of the US Consumer Confidence Index released by the University of Michigan are seen as a measure of the American public’s confidence in the short- and medium-term health of the US economy. Markets such as the stock market are known to be influenced by the index, so the University of Michigan Consumer Confidence Index is often a leading indicator of how much consumers are spending, and therefore how much (or how little) the US economy is growing.

Ultimately, lower-than-expected or declining consumer confidence numbers are often a sign of slowing US economic growth, as well as for the US dollar. Conversely, a higher or above-expected reading can be seen as a bullish indicator for both the US dollar and the broader US economy. Also, it is one of the many metrics that the Federal Reserve closely watches and considers when it comes to making monetary policy decisions.

USD/JPY Technical Analysis and Expectations Today

Ahead of the important US retail sales figures, the USD/JPY pair is consolidating its broader bullish trajectory. There is a chance of a move towards the psychological resistance level of 160.00 if the US retail sales figures come in stronger than expected. Technically, this level may push the technical indicators towards strong overbought levels. On the other hand, according to the performance on the daily chart, moving towards the 155.00 level will be important to start breaking the general upward trend. So far, by considering that in the event of an expected Japanese intervention in the currency markets, the currency pair may be exposed to strong selling operations to take profits.

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