The dollar/yen pair is slightly higher early Tuesday as investors await the release of a suite of US economic reports including retail sales and industrial production.
Futures markets are priced for consecutive 50 basis point hikes by the Federal Reserve in June and July and for the US benchmark interest rate to hit 2.75% by year-end. Today’s reports could confirm those expectations or raise doubts as to whether the economy is strong enough to withstand the Fed’s aggressiveness.
As of 06:50 GMT, USD/JPY is trading at 129.340, up 0.230 or +0.18%. On Monday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) was trading at $72.54, up $0.13 or +0.18%.
Today’s US Retail Sales report, due for release at 12:30 GMT, is expected to show that retail sales rose 1.0% in April and core retail sales rose 0.4%. The report will reveal information on how consumers are spending in the wake of inflation hovering near a 40-year high.
A strong report will justify the Fed’s aggressive tone. Treasury yields are likely to rise on the news, which would give the USD/JPY an additional boost.
A weak report could be an early sign of economic weakness. While this is unlikely to derail the Fed’s plans for a 50 basis point hike in June and July, it could limit expectations for future rate hikes. This could weaken the USD/JPY pair, but will most likely cap any major price advances from the current levels.
Daily USD/JPY
Daily swing chart technical analysis
The main trend is up according to the daily swing chart, however, the momentum is sloping down. A trade above 126.945 will change the main trend down. A move through 131.348 will signal a resumption of the uptrend.
The minor range is between 126.945 and 131.348. The market is currently straddling its pivot point at 129.147.
Support is a pair of 50% levels at 127.410 and 126.316.
Swing chart daily technical forecast
Trader reaction to 129.147 should set the direction for the USD/JPY on Tuesday.
bullish scenario
A sustained move above 129.147 will indicate the presence of buyers. If this move creates enough upward momentum, we could see a rally to the minor high at 139.813 followed by the major high at 131.348.
Bearish Scenario
Continued movement below 129.147 will signal seller presence. If this move gains traction look for selling that may extend into the next cluster of support at 127.520 – 127.410.
side notes
The reaction of US Treasury yields to Tuesday’s Retail Sales and Industrial Production reports will ultimately determine the direction of the USD/JPY pair. Basically, higher yields, higher USD/JPY and lower yields, lower USD/JPY.
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