The Dollar/Yen is trading higher on Thursday after reversing earlier weakness that saw the Forex pair drawing near a major technical support level at 110.662, just above the last bottom at 110.588.
At 0917 GMT, the USD/JPY is trading 111.122, up 0.170 or +0.16%.
Earlier in the session, the Dollar/Yen was trading lower for a sixth consecutive session or since the technical closing price reversal top formed on August 1, the same day as the Fed’s last monetary policy statement and a day after the Bank of Japan’s interest rate decision and policy statement.
Today’s early price action may have been an extended reaction to Tuesday’s positive wage data and reports that the BOJ considered raising rates earlier in the year.
Two days ago, it was reported that Japan’s household spending slid in June but real wages rose at their fastest pace in more than 21 years thanks to higher summer bonuses, a sign the benefits of a prolonged economic recovery are broadening.
Household income also marked the fastest gain in three years on an increase in temporary workers’ pay, offering some hope for BOJ policymakers struggling to accelerate inflation to their elusive 2 percent target.
The strong figures come ahead of Friday’s release of second-quarter gross domestic product (GDP) data, which will likely show the economy expanded an annualized 1.4 percent after contracting in the previous quarter.
Household spending fell 1.2 percent in June from a year earlier, government data showed on Tuesday, marking the fifth straight month of declines. But the fall was smaller than market forecasts of a 1.6 percent slide and a 3.9 percent drop in May.
Household’s inflation-adjusted income rose 4.4 percent in June, the biggest increase since July 2015, as a tightening job market pushed up temporary workers’ pay, the data showed.
Separate data showed workers’ real wages rose 2.8 percent in June from a year earlier, accelerating from a 1.3 percent increase in May and marking the fastest pace of growth since January 1997.
The USD/JPY is recovering from its earlier weakness shortly ahead of trade talks between the United States and Japan. Earlier in the session, the Forex pair was being pushed lower on speculation over when the Bank of Japan will exit its ultra-easy monetary policy.
Today, the U.S and Japan begin trade talks in Washington. Japan is seeking to avert steep tariffs on its car exports and fend off U.S. demands for a bilateral free trade agreement.