USD/JPY spikes to session tops, around mid-108.00s post-US retail sales

The USD/JPY pair spiked around 20-25 pips during the early North-American session and moved closer to mid-108.00s, or fresh session tops post-US retails sales.

Data released on Friday showed that the US monthly retail sales recorded a growth of 0.5% in May, slightly weaker than the 0.6% rise anticipated. The positive surprise, however, came from core retail sales, which coupled with big upward revisions for the previous month's readings provided a modest boost to the US Dollar.

The initial market reaction turned out to be positive for the greenback, albeit expectations that the Fed will be forced to cut interest rates by the end of this year, further reinforced by last Friday's weaker US monthly jobs report and this week's softer consumer inflation figures, might keep a lid on any runaway rally.

Moreover, the Japanese Yen's might continue to benefit from the prevailing cautious mood, as depicted by a negative trading sentiment surrounding the equity markets amid fears of a further escalation in trade tensions between the world's two largest economies, and might further collaborate towards capping gains.

Hence, it would be prudent to wait for a strong follow-through buying before confirming that the pair might have already bottomed out in the near-term and positioning for any further recovery as the focus now shifts to next week's big event risk - the latest FOMC monetary policy update, due to be announced on Wednesday.

Technical levels to watch