USD/JPY declines towards 138.50 amid upbeat Japan Retail Trade data

The USD/JPY pair has witnessed mild selling pressure and is declining towards 138.50 after the release of upbeat economic data. Japan’s Retail Sales have improved to 2.4%, higher than the expectations of 1.9% and the prior release of 1.5% on an annual basis. Also, the monthly Retail Trade has advanced to 0.8%. Meanwhile, the Industrial Production data has landed higher at 1.8% than the expectations and the former release of -2.6% and -2.8% respectively.

On a broader note, the asset has remained in the grip of bulls as the US dollar index (DXY) has displayed a stellar performance. The DXY aims to recapture its two-decade high at 109.29 after upbeat Consumer Confidence data and hawkish commentary from Federal Reserve (Fed) policymakers.

The Conference Board (CB) Consumer Confidence data improved significantly to 103.2, significantly higher than the prior release of 95.3, recorded in July. Improved consumer confidence in the economy results in more retail demand and eventually supports the respective currency. Also, the guidance from New York Fed Bank President John Williams infused fresh blood into the DXY.

Fed Williams is expecting an escalation in the interest rates above 3.5% by this year as it is highly required to slow down the ramping up inflation. He added that next year, the inflation rate could come down to 2.5-3%.

This week, investors’ focus will remain on the US Nonfarm Payrolls (NFP) data, which will release on Friday. Despite a halt in the recruitment process by various tech giants and consequences of shrinkage in liquidity, the job additions data is expected to remain satisfactory. The economic data is seen at 300k, lower than the prior release of 528k.