USD/JPY clings to strong gains above 104.00 handle after US macro releases

Friday’s US economic data provided an extra leg of up-move for the greenback, with the USD/JPY pair hitting fresh session high level of 104.60 before retracing few pips to currently trade around 104.20 region. 

According to the data released just a while ago, US monthly retail sales posted a monthly growth of 0.6% for the month of September, matching consensus estimates and was far better-than contraction of 0.2% (revised from -0.3%) recorded in August. Core retail sales (excluding automobiles) recorded better-than-expected monthly growth of 0.5% for September as compared to 0.4% expected and previous month’s 0.2% contraction. 

Meanwhile, wholesale prices, as measured by PPI, came-in at 0.7% y-o-y for September, surpassing expectations of a 0.6% rise. 

Immediately after the release, the overall US Dollar Index extended its bullish momentum amid increasing prospects of an eventual Fed rate-hike action by the end of this year, with CME group’s FedWatch Tool now pointing to over 60% probability of such an action in December.

Next in focus would be the preliminary release of University of Michigan consumer confidence index for the month of October, followed by the Fed Chair Janet Yellen’s speech later during NY trading session.

Technical levels to watch

A follow through buying interest above multi-week highs resistance near 104.60-65 region is likely to trigger a fresh bout of short-covering and boost the pair immediately towards reclaiming 105.00 psychological mark before aiming towards its next resistance near 105.40 level.

On the downside, sustained weakness back below 104.00 handle, leading to a subsequent drop below 103.70 support, is likely to drag the pair back towards 100-day SMA support near 103.30 region. A convincing break below 100-day SMA would negate any near-term bullish bias and turn the pair vulnerable to break through 103.00 handle and aim towards testing 102.80-75 horizontal support.