- USD/JPY trades neutral at the 145.55 area after hitting a low of 145.10.
- US Retail Sales came in strong, and the markets bet on a hike by the Fed in November.
- Monetary Policies divergences weight on the JPY which couldn’t benefit from robust GDP data.
On Tuesday, the USD/JPY traded flat while the USD seemed to consolidate. On the other hand, the JPY continues to trade vulnerable amid the extreme dovish stance of the Bank of Japan (BoJ) and monetary policy divergence between its peers.
US Retail Sales revealed that the US economy is holding strong. The headline Sales increased by 0.7% MoM, higher than the 0.4% expected, while the ones excluding the Automobile sector also came in strong and came in at 1% vs the 0.4% expected.
Regarding the next Federal Reserve (Fed) meeting, there's a prevailing market expectation of a no hike in September. However, the chances of a 25 basis point adjustment in November reach a peak of around 40%. That said, the focus now pivots to Wednesday's Federal Open Market Committee (FOMC) gathering, as investors seek hints in the forward guidance to attain a distinct perspective on the officials' position.
Despite reporting strong Gross Domestic Product (GDP) data, the JPY continues to trade weak. On Tuesday, it was reported that during the second quarter, the economy expanded by 1.5% QoQ at a 6% annualised pace in both figures. On the bright side, speculations of a potential Bank of Japan (BoJ) intervention to stop the currency's loss is the only hope for the Yen while the USD/JPY consolidated above the 145.00 level.
USD/JPY Levels to watch
The technical analysis of the daily chart supports a bullish view of USD/JPY in the short term. The relative Strength Index (RSI) maintains its favourable position above the midline, displaying an upward inclination. Moreover, Moving Average Convergence Divergence (MACD) showcases green bars, underlining the strengthening bullish momentum. Furthermore, the pair is above the 20,100,200-day SMAs, suggesting that the bulls are firmly in control of the bigger picture.
Support levels: 145.00, 144.70, 144.00.
Resistance levels: 145.70, 146.00, 146.50.
USD/JPY Daily chart
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