- USD/JPY retraces the heaviest downside in 12 weeks with a bounce off 105.20.
- Japan’s Preliminary Industrial Production surge 8.0%, Retail Sales dropped 3.3% in July.
- Risk-tone remains positive with S&P 500 Futures refreshing the record high above 3,515.
- Comments from Fed’s Clarida, second-tier data can direct intermediate moves amid a broad US dollar weakness.
USD/JPY refreshes intraday low while declining to 105.40 after Japan’s July month data dump, published early on Monday. Even so, the yen pair prints 0.10% gains on a daily basis while keeping late Friday's pullback moves from 105.20. The pair’s latest downside pays a little heed to mixed economics and upbeat risk-tone sentiment while cheering the broad US dollar weakness.
Mixed data is the fashion, Abenomics to continue even in absence of PM Abe…
The preliminary Industrial Production surges heavily past-1.2% forecast and 1.9% prior to print 8.0% mark on MoM. Though, the yearly figures are disappointing when flashing 16.1% contraction against -15.7% expected. Further, Retail Sales dropped 3.3% on MoM and 2.8% on YoY versus 8.0% and 2.4% respective forecasts. The USD/JPY ticked up from 105.47 to 105.54 after the data before dropping to 105.42 by the press time.
Other than the mixed data, the pair traders also paid a little heed to the recovery in market sentiment. While portraying the same, S&P 500 Futures refresh the record high to 3,520 whereas the US 10-year Treasury yields pause around 0.72% after declining 2.2 basis points (bps) on Friday.
On the background, uncertainty surrounding the US stimulus joins the Federal Reserve’s readiness to keep pumping the American dollar. Elsewhere, the coronavirus (COVID-19) crisis continues with the latest headlines suggesting a rush towards a vaccine. Additionally, the US-China tussle and Japanese PM Shinzo Abe’s readiness to step down citing health issues seem to challenge the optimists.
It’s worth mentioning that the quote was well offered on Friday after PM Abe crossed wires to announced his resignation citing health issues. However, he will remain as the national leader unless any sure candidate is found. On this issue, the Japan Times recently quoted various economists to say that Japan's next leader will likely maintain the basic Abenomics framework.
Looking forward, comments from Federal Reserve Governor Richard Clarida will be followed closely to reconfirm Chairman Jerome Powell’s bearish bias. Also important are Japan’s Housing, Construction and Consumer Confidence data, as well as the US Dallas Fed Manufacturing Business Index. While Fed policymaker’s downbeat comments can exert additional downside pressure on the pair, mixed forecasts concerning the scheduled economics trouble the bears.
Technical analysis
Unless bouncing back beyond the support-turned-into-resistance trend line stretched from July 31, at 105.75 now, USD/JPY becomes vulnerable to refresh the monthly low near 105.10.
Read: The Chart of the Week: Bears looking for shorts for favourable risk/reward territory
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