USD/JPY Surges on Stronger Dollar, Higher Treasury Yields

USD/JPY has gained following the stronger than expected US retail data and neutral to hawkish comments by US Federal Reserve officials. The Dollar trades at 154.61, 0.22% above its opening price. US housing indicators, such as Building Permits and Housing Starts, have underperformed, suggesting a construction sector slowdown. However, US Industrial Production remains stable, highlighting a mixed yet resilient economic backdrop.

The US Federal Reserve’s Industrial Production in March remained unchanged at 0.4% MoM. Monday’s strong retail sales data sparked a reaction in the fixed-income market, with US Treasury yields rising more than 10 basis points during the week. The Fed is expected to drive the main reference rate to 4.965% towards the end of 2024. San Francisco Fed President Mary Daly said the US central bank is in no rush to ease policy.

Japanese authorities have remained vocal about “closely monitoring the latest developments” in the Forex market. Market participants had pushed the exchange rate past the 154.00 threshold, and no reaction from the Bank of Japan or the Ministry of Finance might keep the rally alive.

The technical outlook suggests that the major remains upward biased, and with no clear signs of intervention, USD/JPY buyers might drive the exchange rate to challenge 155.00. Once cleared, the next stop would be 155.78, followed by the latest cycle high at 160.32. If the pair drops below 154.00, it could open the door for a pullback to April’s 12 high turned support at 153.38 before dropping to 153.00.