Meanwhile, industrial production fell 1.1% month-on-month in March after soaring 2.3% in February. The pullback may reflect the initial effects of US tariffs on manufacturing and exports.
Following the data releases, the USD/JPY dropped from 142.325 to 142.266. The retail sales figure had a more pronounced effect on Yen demand, given its broader implications for inflation and monetary policy.
Beyond the data, trade developments remain crucial for USD/JPY trends. US progress toward trade deals with its key trading partners may ease safe-haven flows into the Yen. However, stalled negotiations or escalating trade tensions could drive Yen appetite.
USD/JPY: Key Scenarios to Watch
- Bullish Yen Scenario: Increasing trade tensions, stalled US-Japan trade talks, positive Japanese data, or hawkish BoJ guidance may push USD/JPY lower toward the 140.309 support.
- Bearish Yen Scenario: A de-escalation in the trade war, a US-Japan trade deal, weak data, or a dovish BoJ stance could drive the pair toward 145.
USD/JPY Daily Outlook: US Labor Market and Inflation in Focus
Later in today’s US session, key data releases could dictate the Fed’s policy stance. Economists forecast April ADP employment to increase 108k, down from 155k in March. A softer reading may raise expectations for a June Fed rate cut. Conversely, a higher print could signal a hawkish Fed stance.
Economists forecast the Core PCE Price Index to rise 2.6% year-on-year in April, easing from 2.8% in March. Softer inflation would likely overshadow labor market data, supporting a more dovish Fed rate path. In this scenario, the USD/JPY could fall toward the 140.309 support level. On the other hand, a higher inflation reading may ease Fed rate cut bets, driving the pair toward 145.