- The price of the USD/JPY currency pair increased from its sharp gains, reaching the resistance level of 145.86.
- It was its highest in nine months, before settling around the level of 145.60 at the time of writing the analysis, considering the stronger-than-expected results of the US economy’s recent retail sales numbers.
- This confirms that the economy The US dollar was not negatively affected by the tightening policy of the US central bank, and in addition to that, the discrepancy between the aggressive US Federal Reserve policy and the Bank of Japan, which has negative interest rates, is still an important factor for a strong upward path for the currency pair.
Yesterday, it was announced that US retail sales increased stronger than all expectations, in a sign that strong consumer spending continues to support the resilient US economy. According to the advertiser, retail sales rose a better-than-expected 0.7% in July from June, according to a Commerce Department report. The government said the gains followed a 0.3% increase in the previous month. Analysts noted that spending on Amazon Prime Day, the large two-day online sales event that took place earlier last month, also helped boost online sales. Excluding autos and gas, sales were up 1%. Analysts said the closely watched US retail sales category, which excludes auto dealers, gas stations, building materials, and food, jumped 1% last month from the previous month, the biggest move in six months.
But higher interest rates are weighing on economic activities that rely heavily on credit, such as sales of homes, vehicles, furniture, and electronics. However, this rise reflects the resilience of the US economy despite the still challenging economic environment of continued price hikes and high-interest rates that make borrowing using credit cards and obtaining a home mortgage more expensive. However, spending has been volatile this year after jumping about 3% in January. Sales fell in February and March before recovering in April and May.
The report comes as US inflation rates have fallen, but not enough to meet the Fed's target rate. The US inflation rate rose in July after 12 consecutive months of declines. But excluding volatile food and energy prices, so-called core inflation matched the lowest monthly rise in nearly two years. This is a sign that rate hikes by the Fed have continued to slow price increases. Inflation data released by the government last week showed that overall consumer prices rose 3.2% from a year earlier. The latest figure remained well below last year's peak of 9.1%, although still above the Fed's 2% inflation target.
USD/JPY Technical Outlook
According to the performance on the daily chart below, the general trend of the USD/JPY currency pair is still bullish. Although its recent gains moved all technical indicators towards strong overbought levels, the above-mentioned factors of the strength of the currency pair ensure that the bulls remain in control of the trend until the occurrence of a Japanese intervention in the markets to prevent a further collapse of the Japanese yen price, the closest resistance levels to the current performance are 146.20 and 147.00, respectively.
At the same time, if the content of the minutes of the last meeting of the Federal Reserve Bank came in favor of expectations of a calming pace of tightening of the US Federal Reserve's policy, the currency pair may be exposed to profit-taking sales before it rebounds upward in its natural course.
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