USD/JPY consolidates in a narrow range around 147.40 ahead of the US UoM confidence data

• USD/JPY oscillates around the 147.33-147.50 region in a narrow trading band.
• BoJ said a pivot would not be considered as long as wage and inflation figures do not meet its forecast.
• US Jobless Claims rose by 220,000 last week from 217,000; Producer Price Index (PPI) came in above the market consensus.
• Market players await the US University of Michigan Consumer Confidence survey due on Friday.

The USD/JPY pair consolidates its recent gains in a narrow range below the mid-147.00s during the early Asian trading hours on Friday. The stronger US dollar (USD) is bolstered by robust US economic data. Meanwhile, the US Dollar Index (DXY), a measure of the value of USD against six other major currencies, holds above 105.35, near its highest daily close since March. The pair currently trades near 147.45, losing 0.02% on the day.

On Thursday, Japan’s Machinery Orders fell 13% in July from a 5.8% drop in the previous month. On a monthly basis, the figure dropped 1.1% from a 2.7% rise in June. Both figures came in below the market consensus. The downbeat data fails to boost the Japanese Yen (JPY) amid the dovish stance of the Bank of Japan (BoJ) policymakers.

BoJ has stated that a pivot would not be considered as long as wage and inflation figures do not meet its forecast, which keeps the JPY vulnerable against its rivals. BoJ Governor Kazuo Ueda stated on Monday in an interview that the central bank could exit its negative interest rate policy when its inflation target of 2% is near and they would have sufficient evidence by the end of the year to evaluate whether interest rates should stay negative. Furthermore, Japanese Finance Minister Shunichi Suzuki said on Wednesday that he will strive to conduct debt management appropriately.

On the USD’s front, the US Department of Labor reported on Thursday that Jobless Claims for the week ending September 8, rose by 220,000 from 217,000 and below the market consensus of 225,000. Additionally, economic data showed that the US economy remains resilient and inflation rebounded in August. The US Producer Price Index (PPI) for August rose by above the market consensus, with the annual rate climbing to 1.5% from 0.8%. The annual Core rate came in at 2.2% from 2.4%. Retail Sales for August increased by 0.6% MoM, exceeding expectations of 0.2%.

The US Dollar (USD) rose on Thursday as strong economic data failed to shift expectations that the Federal Reserve would keep its main interest rate stable next week. According to the CME FedWatch Tool, believe the Fed will not hike the rate at its September meeting but the odds of a rising rate in November is 35%.

In the absence of the top-tier economic data release from the Japanese docket, the USD/JPY pair remains at the mercy of USD price dynamics. On Friday, the US Empire State Manufacturing Index, Industrial Production, and the University of Michigan Consumer Confidence survey will be due in the North American session. Traders will take cues from these figures and find trading opportunities around the USD/JPY pair.