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USD/JPY drops on Japan data

Household spending in Japan is fast becoming a problem after contracting 8% in May.

Japanese stock exchange
Source: Bloomberg

With prices continuing to accelerate and wage growth remaining subdued, it’s not surprising to see a drop off in spending. National CPI ex food and energy showed a 2.2% rise and was up 3.4% ex-fresh food.

Meanwhile unemployment ticked a touch lower with the amount of jobs to applicants rising. Retail sales were still subdued but recovered significantly from April. Presumably front-loading ahead of the sales tax hike is still at play. The real concern for Japan now is the failure to generate domestic demand particularly with household spending actually falling. Prices are accelerating according to plan which really limits the probability of seeing more stimulus.

Downtrend resistance in play

USD/JPY extended its losses on the back of today’s data and went on to test key support in the 101.50 region. This level has been tested time and time again and has managed to find some buyers. Interestingly, there is also a downtrend resistance at play on the hourly chart which is likely to cap any near term recovery. This line currently comes in at around 101.70 and will deserve some attention.

The US economic calendar is relatively light today with consumer sentiment and inflation expectations being the only readings to look out for.

Spot FX USD/JPY chart
Click to enlarge

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