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Jun 16 - 01:55 PM

USD/JPY - COMMENT-Strong US Retail Sales Rebound May Leave USD/JPY Wanting

By Randolph Donney  —  Jun 16 - 11:45 AM

USD/JPY rose on unexpectedly strong U.S. retail sales nAQN02OJY5, but it might need more help rallying now than during its early-June bounce.
While today's data initially drove Treasury yields and stocks higher, investor optimism was muted due to weak industrial production data nAPN0F4U9Q.
Because the dollar and yen are both seen as havens and funding currencies, strong and weak economic data are often offsetting, though higher Treasury-JGB yield spreads support the U.S. currency.
However, unlike USD/JPY's early-June surge up to 109.85, there are far fewer speculative shorts left to be squeezed, leading to consolidation of the subsequent 109.85-106.58 slide.
The 38.2% Fibo, 21-DMA and June 10 high at 107.83-87 should cap price action unless Fed Chair Powell diminishes his dovish bias in congressional testimony nW1N26P027.
More robust resistance is at 108.215 on EBS nL1N2DT0TO.
The yen weakened on the crosses overnight after the Fed announced corporate bond purchases nL1N2DS1IM and launched its Main Street lending program nL1N2DS0TD.
But fresh pandemic nL4N2DT0KX and geopolitical risks nL4N2DT0HMnL4N2DT20X tempered investors' enthusiasm.
Reports of a potential COVID-19 treatment nL8N2DT3HE might improve the risk tone and keep USD/JPY bullishly above the 107.25 cloud top.
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Source:
Refinitiv IFR Research/Market Commentary

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