USD/JPY edges lower as US Core PCE cools as foreseen

• USD/JPY dips following February’s Core PCE data, indicating a gradual cooling of inflation but concerns linger.
• Fed officials maintain a cautious outlook on rate cuts, awaiting further evidence of sustained disinflationary trends.
• Market awaits insights from Fed Chair Powell and other Fed speakers.

The USD/JPY posts  minuscule losses following the release of the US Core Personal Consumption Expenditure (PCE) price index, the US Federal Reserve’s preferred inflation gauge. Data came as expected with prices continuing to trend lower, though at a slower pace. The major trades at 151.25, down 0.09%.

USD/JPY reacts modestly to the latest US economic indicators

The US Bureau of Economic Analysis (BEA) revealed that the Core PCE was lower than expected in February, coming at 0.3% MoM, below the previous month’s data. Yearly data cooled from 2.9% to 2.8%, as estimated by the consensus. Headline inflation came at 0.3% below January’s forecasts, and in the 12 months to February, it was higher than the previous month at 2.5%, up from 2.4%.

Although the data relieves pressure on the Federal Reserve, policymakers continue to take a cautious stance. Other inflationary readings, such as the Consumer Price Index (CPI) and the Producer Price Index (PPI), show signs that inflation is becoming entrenched above the 3% threshold.

On Wednesday, Fed Governor Christopher Waller was hawkish, saying the US central bank is in no rush to cut rates. Later, San Francisco Fed President Mary Daly and Fed Chair Jerome Powell would cross newswires, with traders eyeing their comments.

Even though the disinflationary process is evolving, the labor market is re-tightening again, following four consecutive weeks of fewer Americans filing for unemployment benefits. That can increase spending, which consequently could push prices higher.

Wells Fargo analysts cited by Bloomberg noted “We really just haven’t seen that consumer fatigue that we were getting some hints of in the last month’s data, …. That’s going to make it really hard, I think, for businesses to hold the line on prices if consumers are still willing to splash out at these levels.”

USD/JPY Price Analysis: Technical outlook

The daily chart portras the pair consolidated at around the 151.15/151.60 area, unable to gather tration in eigher way, as Japanese authorities threatened to intervene in the markets. Nevertheless, if the USD/JPY pushes above 152.00, that an clear the path to challenge 153.00. On the flip side, buyers failure to hold prices above 152.00 and 151.00, could sponsor a leg down. The first support would be the Tenkan Sen at 150.49, followed by the Senkou Span A at 149.86.