- The USD/JPY outlook is pointing north as the dollar remains strong following upbeat retail sales data.
- US unemployment claims were well below the forecasts.
- The yen was fragile as markets awaited an election in Japan.
The USD/JPY outlook points north as the dollar remains strong after upbeat retail sales data from the previous session. Meanwhile, the yen was fragile as a looming election in Japan created some political uncertainty.
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The US dollar and Treasury yields rose on Thursday after data revealed solid retail and core retail sales. Sales jumped by 0.6%, surprising economists who had expected a 0.1% increase. The data eased concerns about the state of the economy after Trump’s tariffs.
Market participants also focused on jobs data, where unemployment claims were well below the forecasts. These reports, along with this week’s upbeat inflation data, led to a decline in expectations for a Fed rate cut. At the moment, market participants are only pricing a 54% chance of a rate cut in September.
Meanwhile, the yen was fragile as markets awaited an election in Japan. Polls are showing that the ruling party might lose. Such an outcome would create uncertainty about fiscal policies. At the same time, it could complicate the ongoing trade talks between the US and Japan. Japan is working hard to avoid a 25% tariff on its exports to the US.
USD/JPY key events today
Market participants do not expect any key events today. Therefore, they will continue to digest Thursday’s releases.
USD/JPY technical outlook: 149.01 resistance poses a challenge
On the technical side, the USD/JPY price has paused its rally near the 149.01 level. This is where the price made its previous high. Meanwhile, it trades above the 30-SMA with the RSI above 50, supporting a bullish bias.
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The price has maintained a solid rally above the SMA, respecting it as support. At the same time, it has made higher highs and lows as it rose. However, after such a steep rally, bulls are struggling to break above the most recent high.
The RSI has made a bearish divergence, indicating weaker bullish momentum. If bulls regain strength, the price will break above 149.01 and climb to retest the 150.00 key psychological level. However, if not, bears might break below the SMA and the 148.02 support, indicating a shift in sentiment.
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