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USD/JPY Retreats After Weak US Data, Buyers Consolidate

USD/JPY is trading slightly lower at 152.95 following a drop in US consumer confidence as measured by the University of Michigan (UoM) Consumer Sentiment Index. However, the pair is poised for a weekly gain on the back of recent strong inflation data.

US Sentiment Weakened, Inflation Expectations Tick Up

The UoM Consumer Sentiment Index fell to 77.9 in early April, below expectations of 79. Both the Current Conditions Index and Consumer Expectations Index declined. Importantly, one-year and five-year inflation expectations rose.

Hot Inflation Data Fueled Prior USD Gains

Despite Friday’s minor retreat, USD/JPY is well-supported by this week’s higher-than-expected US Consumer Price Index (CPI) readings. The data sparked more hawkish Fed expectations and rising US Treasury yields, boosting USD throughout the week. Markets have largely priced out hopes for a June rate cut. Upcoming March Retail Sales figures on Monday could provide further market direction.

Technical Outlook: USD/JPY Consolidation, Bullish Bias Remains

The USD/JPY daily chart shows a minor pullback within an ongoing bullish trend. While the Relative Strength Index (RSI) has retreated from overbought levels, it remains positive. Green MACD bars reinforce the pair’s upward momentum.

The broader outlook remains bullish with USD/JPY trading well above the 20-day, 100-day, and 200-day Simple Moving Averages (SMA).