USD/JPY Nears 157.00 After Japan CPI Inflation Rebounds in Tokyo

• USD.JPY is recovering from intraday lows near 156.40.
• CPI inflation in Tokyo rebounds in May from its lowest level in two years.
• Investors are eagerly awaiting key US inflation data on Friday.

USD/JPY rebounded on Friday morning, reaching the 157.00 level after a short-term low of 156.40. Japan's Consumer Price Index (CPI) inflation in Tokyo rebounded early Friday, paving the way for investors to turn to the Personal Consumption Expenditure (PCE) Price Inflation Index in the States -United published Friday.

Japan's consumer price index (CPI) inflation rose in May, climbing 2.2% for the year ended May, rebounding from the 26-month low in the previous period of 1.8%. Japanese retail also rebounded from a two-year low of 2.4%, beating forecasts of 1.9% and recovering from the previous 1.1%, which was revised even lower from 1.2 %.

Read more: Japan CPI inflation in Tokyo rises to 2.2% from 1.8%, recovering from 26-month low

With Tokyo CPI inflation ruled out, which serves as a preview of Japanese national inflation released about three weeks after Tokyo CPI, markets are free to turn to key U.S. data due Friday.

Market sentiment recovered on Thursday after U.S. gross domestic product (GDP) slowed to 1.3% growth in the first quarter, down from the previous 1.6%. Declining U.S. growth figures are helping to bolster rate cut hopes, keeping overall market risk sentiment elevated heading into Friday.

U.S. Personal Consumer Expenditure (PCE) Price Index inflation data is due in Friday's U.S. market session and is expected to hold at 0.3% month-on-month, while investors are hoping for enough softening in US economic figures to prompt the Federal Reserve to cut rates (Nourished).

According to the CME FedWatch tool, interest rate markets are assessing the likelihood of a rate cut of at least a quarter point from the Federal Open Market Committee (FOMC) when the rate-setting arm of the Fed will meet in September.

USD/JPY Technical Outlook

USD/JPY found a quick rebound towards 157.00 early Friday, but the pair falls back into familiar congestion near 156.80. The pair has been crippled along the 200 hour exponential moving average (EMA) at 156.73 since falling from this week's high near 157.70.

Daily candlesticks recorded their first significant bearish candle since a near 1.0% decline on May 15, but the pair overall remains firmly bullish as bids trade well above the 200-day EMA at 149.47.

USD/JPY Hourly Chart

USD/JPY daily chart