USD/JPY retreats towards 145.00 as upbeat Japan statistics join US Dollar’s pullback ahead of Retail Sales

  • USD/JPY prints the first daily loss in seven while reversing from YTD high, pressured around intraday low of late.
  • Upbeat Q2 GDP from Japan, Industrial Production for June join sluggish yields at multi-day high to tease Yen pair sellers.
  • Cautious optimism in the market, consolidation ahead of US Retail Sales allows USD/JPY to retreat from yearly peak.

USD/JPY clings to mild losses around 145.50-45 heading into Tuesday’s European session as it prints the first daily loss in seven. In doing so, the Yen pair takes clues from the upbeat Japanese statistics and the US Dollar’s retreat amid a sluggish Asian session.

That said, the Japanese economic growth came in as 1.5% QoQ versus 0.8% expected and 0.7% prior, per the preliminary readings of the second quarter (Q2) 2023 Gross Domestic Product (GDP) figures. Additionally, Japan’s Industrial Production also improves to 2.4% MoM in June versus 2.0% expected and prior.

Elsewhere, Japan’s Economy Minister Shigeyuki Goto cited expectations of witnessing a moderate economic recovery before suggesting the need to pay attention to the risk of global slowdown and the effects of price hikes.

It’s worth noting that the latest comments from Japanese Finance Minister Shunichi Suzuki also teased likely another intervention from Tokyo and exerted downside pressure on USD/JPY price. That said, the policymaker ruled out the possibility of targeting a specific price level when intervening while also showing dislike for rapid moves.

On the other hand, the US Dollar Index (DXY) retreats from the highest level in five weeks, printing the first daily loss in four around 103.05 by the press time, after witnessing downbeat inflation clues. That said, the New York Fed’s one-year inflation expectations eased to 3.5% for July, down three points by falling to the lowest level since April 2021. New York Fed survey, however, also suggested confidence in positive labor market conditions and economic transition.

Elsewhere, the US 10-year Treasury bond yields seesaw at the highest level since November 2022, marked the previous day, making rounds to 4.20% by the press time, which in turn also prods the USD/JPY buyers from extending the previous day’s run-up.

It should be observed that the market’s cautious optimism, as perceived from the mildly bid US and European stock futures, also poke the USD/JPY bulls.

Looking ahead, the US Retail Sales for July, expected 0.4% MoM versus 0.2% prior, will be important to watch for intermediate directions of the USD/JPY pair ahead of Wednesday’s Minutes of the Federal Reserve’s (Fed) latest monetary policy meeting. Above all, the bond market moves and the divergence between the Bank of Japan (BoJ) and the Fed will be crucial for a clear guide.

Technical analysis

Overbought RSI conditions join an ascending resistance line from November 2022, close to 145.60 at the latest, to trigger the USD/JPY pair’s latest pullback. However, the Yen pair sellers need validation from a 12-day-old rising support line, close to 144.85 at the latest.

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