USD/JPY pulls back from 2-week highs and falls below 133.00 after US data.

• USD/JPY pulls back from two-week highs, though no follow-up selling.
• The USD pared its intraday gains on weaker inflation data and acted as a headwind.
• Risk appetite weakens the safe haven yen and provides support.

The pair USD/JPY pared much of its intraday gains to 2-week highs and eased back below 133.00 during early North American session on Friday.

The modest intraday rally in the US dollar (USD) loses steam after the US Bureau of Economic Analysis reported that the Personal Consumption Expenditure (PCE) price index slowed to a 5% yoy rate in February, compared to the previous 5.3%. In addition, the core PCE price index, the Fed’s preferred inflation gauge, unexpectedly dipped from 4.7% in January to 4.6% yoy. The data adds to the uncertainty over the path of the Fed rate hike, which is acting as a headwind for the dollar and causing some intraday selling around the USD/JPY pair.

Bearish traders followed the trail of a modest pullback in US Treasury yields, which translates into a narrowing of the US-Japan rate differential and benefits the Japanese yen (JPY). That said, the underlying bullish tone around global equity markets – amid fading fears of a full-blown banking crisis – continues to undermine the yen’s safe haven and continues to support a slightly positive tone around the yen. USD/JPY. This, in turn, warrants bearish traders being cautious and before positioning for any significant corrective pullback.

Also on the US economic calendar on Friday will be the Chicago PMI and the revised Michigan Consumer Sentiment Index, though they could do little to provide any meaningful momentum. However, the USD/JPY pair still looks set to post weekly gains for the first time in the previous five and remains at the mercy of USD price action heading into the weekend.

Technical levels to watch