Title: USD/JPY oscillates around 139.00, upside looks likely on firmer consensus for US Retail Sales

July 15, 2022 01:59 AM ET

By: AnalysisWatch

The USD/JPY pair is moving back and forth within a narrow range of 138.77–139.12 at the beginning of the European trading session. The asset has turned sideways after a vertical upward movement, and further upward movement seems likely as the US dollar index (DXY) is looking for a rebound after a corrective movement. The DXY is expected to make significant gains after breaking above the round resistance level of 109.00.

Investors are channeling liquidity into the greenback in anticipation of higher U.S. retail sales to be released in the New York session. According to the market forecasts, investors should be prepared for a higher value of 0.8% compared to the previous release of -0.3%.

The investment community acknowledged that higher fuel prices in June and higher energy bills would have similarly impacted retail sales. The improved Consumer Price Index (CPI) and Producer Price Index (PPI) reports reinforce the upside filters.

However, positive retail sales could be lucrative for the DXY but not for the economy, as the data is not driven upward in volume terms. Declining durable goods sales could also put pressure on the demand forecast.

On the Tokyo front, yen bulls will remain weaker as a continuation of the Bank of Japan's (BOJ) ultra-loose monetary policy will exacerbate the divergence between the Federal Reserve (Fed) and the BOJ. The BOJ is under pressure to keep its inflation rate above 2%, and to achieve this, it will have to raise the wage-price level significantly.