- USD/JPY reverses an intraday dip amid the emergence of some USD dip-buying on Tuesday.
- Hawkish remarks by Fed’s Mester lift bets for additional rate hikes and boosts the Greenback.
- A softer risk tone could underpin the safe-haven JPY and cap any further gains for the major.
The USD/JPY pair attracts some dip-buying on Tuesday and move back above the 136.00 mark during the early North American session, closer to a one-and-half-week high touched the previous day.
The US Dollar (USD) recovers its intraday losses in reaction to hawkish remarks by Cleveland Federal Reserve President Loretta Mester and turns out to be a key factor lending support to the USD/JPY pair. Mester said that interest rates are not at a sufficiently restrictive level and that the central bank isn't at the spot to hold rates yet. This, in turn, triggers a sharp intraday rise in the US Treasury bond yields and acts as a tailwind for the Greenback, overshadowing the mixed US Retail Sales figures.
The US Census Bureau reported that the headline US Retail Sales rose 0.4% MoM in April as compared to consensus estimates for a reading of 0.8%. Meanwhile, sales excluding automobiles registered a modest 0.4% growth during the reported month, as anticipated. The positive surprise came from Retail Sales Control Group, which recorded a solid rebound from the previous month's 0.4% downfall and increased by 0.7% during the reported month, surpassing market expectations for a flat reading.
This, along with a more dovish stance adopted by the Bank of Japan (BoJ), continues to undermine the Japanese Yen (JPY) and further contributes to the USD/JPY pair's intraday bounce. It is worth recalling that BoJ Governor Kazuo Ueda said last week that it was too early to discuss specific plans for an exit from the massive stimulus program. That said, a generally weaker toen around the equity markets could benefit the JPY's relative safe-haven status and cap any meaningful gains for the major.
Against the backdrop of concerns about the US debt ceiling, weaker-than-expected Chinese macro data fuels recession fears and tempers investors' appetite for riskier assets. Nevertheless, the fundamental backdrop seems tilted in favour of bullish traders and suggests that the path of least resistance for the USD/JPY pair is to the upside. Hence, a subsequent move up towards testing the 200-day Simple Moving Average (SMA), currently around the 137.00 round-figure mark, looks like a distinct possibility.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stays in positive territory above 1.0850 after US data
EUR/USD clings to modest daily gains above 1.0850 in the second half of the day on Friday. The improving risk mood makes it difficult for the US Dollar to hold its ground after PCE inflation data, helping the pair edge higher ahead of the weekend.
GBP/USD stabilizes above 1.2850 as risk mood improves
GBP/USD maintains recovery momentum and fluctuates above 1.2850 in the American session on Friday. The positive shift seen in risk mood doesn't allow the US Dollar to preserve its strength and supports the pair.
Gold rebounds above $2,380 as US yields stretch lower
Following a quiet European session, Gold gathers bullish momentum and trades decisively higher on the day above $2,380. The benchmark 10-year US Treasury bond yield loses more than 1% on the day after US PCE inflation data, fuelling XAU/USD's upside.
Avalanche price sets for a rally following retest of key support level
Avalanche (AVAX) price bounced off the $26.34 support level to trade at $27.95 as of Friday. Growing on-chain development activity indicates a potential bullish move in the coming days.
The election, Trump's Dollar policy, and the future of the Yen
After an assassination attempt on former President Donald Trump and drop out of President Biden, Kamala Harris has been endorsed as the Democratic candidate to compete against Trump in the upcoming November US presidential election.