USD/JPY shows signs of weakness above 134.00 awaiting US GDP and BoJ announcement

• USD/JPY looks vulnerable above 134.00.
• Bullish durable goods orders data would indicate that core CPI would be more persistent going forward.
• Ueda said it is appropriate to continue the easing of yield curve control.

USD/JPY looks vulnerable above the critical 134.00 support early in the European session. The major pairs are experiencing selling pressures as the rally in the US Dollar Index (DXY) is expected to fade soon. Earlier, the DXY bounced after hitting a weekly low of 101.20. The absence of support indicators indicates that the recovery of the dollar index will be short-lived.

S&P 500 futures are trading on a negative trajectory early in the European session, in anticipation of weak earnings and misguidance from technology stocks. Investors have shored up the risk aversion theme and are pouring funds into US government bonds.

This week, investors await the release of durable goods orders data for further guidance. The economic data indicates the long-term demand received by manufacturers of durable products. Core US Consumer Price Index (CPI) data has not softened much when compared to headline inflation. And upbeat durable goods orders would indicate that core CPI would be more persistent going forward. According to the consensus, economic data would grow by 0.8% compared to the contraction of 1.0% registered in February.

As for the Japanese Yen, the Bank of Japan’s interest rate policy will continue to take center stage. New BoJ Governor Kazuo Ueda is expected to continue the expansionary monetary policy to support gradually accelerating inflation. In his appearance before Parliament, Ueda declared that it is convenient to continue with the easing of the control of the yield curve.

Meanwhile, the monthly economic report released by the Japanese Cabinet Office maintained the overall view that the economy was in a moderate recovery.