USD/JPY Price Analysis: Robust Retail Sales Boost Dollar

• US retail sales beat forecasts in July, indicating robust economic growth.

• The yen’s decline has traders alert for potential intervention.

• Surging exports in Japan drove 6% annualized economic growth in the second quarter.

Today’s USD/JPY price analysis is bullish. The dollar held steady following July’s better-than-anticipated retail sales. This highlighted the US’s economic strength, reinforcing expectations the Fed will maintain elevated interest rates. 

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Notably, US retail sales exceeded projections, indicating robust economic growth in the early third quarter. This was due to increased online shopping and higher restaurant spending.

Meanwhile, the yen’s decline has traders alert for potential intervention, as it has now reached the critical 145 per dollar level for four consecutive sessions. Previously, this range led to significant dollar selling by Japanese authorities.

Maybank analysts noted that markets are on edge, cautious about actions from the Ministry of Finance and the Bank of Japan. However, unlike the previous year, policymakers have been less forceful in their stance against defending a weakening yen. 

Meanwhile, Finance Minister Shunichi Suzuki stated authorities aren’t targeting specific currency levels for intervention. Consequently, suspicions arose that they might hesitate to order intervention as quickly as last year.

Surging exports drove 6% annualized economic growth in the second quarter due to a weaker yen. Moreover, lower global oil prices curbed import costs. Yet, the significant yield gap with the United States continues to weaken the yen. The Bank of Japan is cautiously moving away from its ultra-loose monetary policy, and there’s optimism that US rates might have peaked. However, the current bond market situation supports yen selling.

Despite these factors, currency traders remain apprehensive about provoking intervention.

USD/JPY key events today

Investors expect the building permits report from the US and the FOMC meeting minutes. These minutes might hold clues on the next Fed policy meeting.

USD/JPY technical price analysis: Price eases off recent peaks in a gradual retreat.

On the charts, USD/JPY is slowly retreating from recent highs. The price is approaching the 145.00 key level, which might act as support. At the same time, the price is approaching 30-SMA support.

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The bullish bias is strong as the price trades above the SMA and the RSI near the overbought region. Therefore, bulls might resurface when the price gets to the support zone. This would push the price higher to retest the 146.02 resistance.

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