USD/JPY is getting a boost following very solid U.S. June retail sales data .
Indeed, that data should lift Q2 GDP growth enough to make the Fed's easing guidance even more heavily dependent on bad news abroad being an eventual threat to the U.S. economy.
The Fed's semi-official status as the world's central bank, and the lingering threat to global trade and growth from protectionism nL4N24H1XO, give the Fed some latitude to do an insurance rate cut on July 31.
However, a panic-like 50bp cut, that's still priced as a 22% probability, is limiting the rebound in U.S. yields and USD/JPY following the strong sales report.
Sluggish June industrial production and capacity utilization nTLAGIEF75 serve as a reminder of fallout from the trade confrontation with China nL4N24H1XO, and possibly others .
But with employment strong and interest rates incredibly low, personal consumption remains robust enough to paper over trade-related pressures for now.
USD/JPY is running into 10-DMA resistance at 108.27, but four straight days of failed attempts to close prices below 107.88, the 50% Fibo of the June-July rebound, give bulls somewhat better standing, particularly with Treasury-JGB rate spreads firming and stocks holding up reasonably well.
Large 108.50 expiries through week's end should cap gains for now.