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After falling to the 145.10 low, the USD/JPY pair is neutrally trading around 145.65 at the time of writing. Strong US retail sales led markets to expect a Fed rate move in November. BoJ’s divergent monetary policies are hurting the yen, which is unable to gain from strong GDP figures.
The Bank of Japan offered limitless Japanese Government Bonds (JGBs) of 5–10 years of residual maturity at a fixed rate on early Monday in Asia, marking the start of the trading week. By doing this, the Japanese central bank controls the yields on the important JGBs and establishes a floor for the value of the yen.
The USD/JPY traded unchanged on Tuesday, although the USD appeared to be consolidating. The severe dovish position of the Bank of Japan (BoJ) and differences in monetary policy among its peers, on the other hand, have led to the JPY’s continued vulnerability in the market.
US retail sales demonstrated how well the US economy is doing. The overall Sales climbed by 0.7% MoM, which was better than the 0.4% anticipated. The Sales excluding the Automobile sector also performed well, coming in at 1% vs. the 0.4% expected.
The general market assumption for the upcoming Fed meeting is for there to be no rate hike in September. The likelihood of a 25-basis point modification in November, though, peaks at about 40%. Nevertheless, attention is now shifting to the Federal Open Market Committee (FOMC) meeting minutes on Wednesday as investors look for cues in the forward guidance to have a clear understanding of the members’ viewpoint.
The Yen is weakly traded despite having solid Gross Domestic Product (GDP) data. According to data released on Tuesday, the GDP grew by 1.5% QoQ and 6% annually during the second quarter. On the plus side, when the USD/JPY consolidated above the 145.00 mark, there is only a slim chance that the Bank of Japan (BoJ) will intervene to stem the currency’s decline.
A bullish outlook for USD/JPY in the near term is supported by the technical analysis of the daily chart. With an upward slope, the relative Strength Index (RSI) keeps its advantageous position above the midline. Green bars are also displayed on Moving Average Convergence Divergence (MACD), highlighting the growing bullish trend. Additionally, the pair is trading above the 20,100,200-day SMAs, indicating that the bulls have a firm grip on the wider picture.
