- US retail sales rose 1.0% in July.
- The probability of a 50 bps Fed rate cut in September fell to 25%.
- US jobless claims fell to 227,000 last week.
The USD/JPI outlook paints a bullish picture as the dollar trades near a two-week high against the yen following positive US sales data. Meanwhile, the rate-sensitive yen was weak as US Treasury yields rose amid falling Fed rate cut expectations. At the same time, the outlook for a Bank of Japan rate hike remained clouded by political uncertainty.
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The US dollar made a solid bullish move on Thursday after US retail sales rose 1.0% in July. This increase was much larger than the forecast increase of 0.3%. Moreover, it showed that the American consumer is resilient. As a result, the probability of a 50 bps Fed rate cut in September fell to 25%. Meanwhile, US Treasury yields rose, weighing on the yen.
Another report found that US jobless claims fell to 227,000 last week, below forecasts for 235,000. The report played down fears that the labor market was deteriorating. Low unemployment indicates strong demand and a tight market.
Upbeat US economic reports followed inflation data showing moderate growth. As a result, the market is optimistic that the Fed could achieve a soft landing.
On the other hand, the yen was fragile on Friday due to political uncertainty in Japan. Prime Minister Fumio Kishida recently decided to step down, leaving a huge void. He has largely supported the Bank of Japan’s recent hiking cycle. Accordingly, analysts believe the BoJ may pause until there is more political certainty before raising interest rates.
USD/JPI Key Events Today
There will be no key economic reports from the US or Japan, so investors will continue to absorb yesterday’s reports.
USD/JPI Technical Outlook: Bulls are approaching the 0.618 Fib retracement level
On the technical side, the USD/JPI price made a sharp, bullish move, breaking away from the 30-SMA and the 0.382 Fib level. At the same time, the RSI has approached overbought territory, indicating solid bullish momentum.
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The price is approaching a solid barrier consisting of the resistance at 150.03 and the Fib level of 0.618. As the bullish bias is strong, the price could soon break this barrier and make new highs. Such a move would pave the way for the bulls to revisit the 155.01 resistance.
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