USD/JPY weakens back below 111.00 mark on dismal US retail sales data, US ISM PMI next

   •  US monthly retail sales data comes in weaker than expected and weighs on the USD.
   •  An upward revision of the previous month’s sales figures helped limit deeper losses. 
   •  Risk-on mood undermines JPY’s safe-haven demand and lends some additional support.

The USD/JPY pair weakened back below the 111.00 handle and refreshed session lows in reaction to dismal US monthly retail sales figures. 

The pair extended its steady intraday retracement slide from 1-1/2 week tops and lost some additional ground after yet another disappointing US macro data, showing that the retail sales declined 0.2% m/m in February.

Adding to this, core retail sales (excluding automobiles) also missed market expectations, coming in to show a fall of 0.4% during the reported month and exerted some downward pressure on the already weaker US Dollar.

The downside, however, remained limited, at least for the time being, and was tapered by an upward revision of the previous month's reading, now showing solid growth of 0.7% as compared to 0.2% reported previously.

As Yohay Elam, FXStreet's own Analyst explains: “Markets are trying to assess whether the US economy continues growing at a robust pace despite slowdowns in other places, or if things are worsening also in the world's strongest economy.”

This coupled with the prevalent risk-on mood, supported by upbeat Chinese PMI prints, continued weighing on the Japanese Yen's relative safe-haven status and further collaborated towards limiting any deeper losses. 

With the latest leg of a downtick, the pair has now filled the weekly bullish gap, albeit has managed to find some support near the 110.80 region, which should now act as a key pivotal point for intraday traders.

Hence, it would be prudent to wait for a strong follow-through selling before confirming that the near-term positive momentum might have already run out of steam and positioning for any further near-term depreciating move.

Technical outlook

Valeria Bednarik, FXStreet's American Chief Analyst writes, “the pair retains its short-term bullish stance, according to technical readings in the 4 hours chart, as its battling to hold above the 100 and 200 SMA, both around the current level, while the 20 SMA keeps heading north, now at around 110.60, where the pair also has the 38.2% retracement of the mentioned slide.”