USD/JPY traders will look for impetus from Japan’s National CPI data on Thursday.
US dollar remains upbeat, economic data released on Tuesday surpassed expectations.
USD/JPY strengthens on a positive outlook, eyes towards major resistance 115.00.
USD/JPY was trading at its multi-year high on Wednesday at around 114.81, the strongest since October 20 and then pulled back modestly. The pair, however, could be heading towards a major resistance barrier of 115.00. At the time of reporting, it peaked at 114.93 with a low of 114.78. The combination of higher US T-bond yields, rising equity prices and a rally of the US dollar across the board helped the pair to take up more ground.
At this point, if the currency can break the near-side resistance of 115.00, there really aren’t any significant chart points until the December 2016 high near 118.65.
In addition to this, positive Merchandise Trade Balance Total (October), released by the Japanese Finance Ministry on Tuesday, shows a trade surplus at 67.4 billion Yen ($586.60 million). However, a Reuters report suggests that Japan’s export growth snapped 7-month double-digit expansion in October, led by a decrease in US and China-bound car shipments.
A slowdown in the shipments highlights risks for the Japanese economy, which is highly dependent on the exports and trade surplus, from global supply constraints. Any fluctuations in the exports will shift investors from other safe havens, directly impacting the currency pair’s value.
Furthermore, the pair’s investors are looking for the Japanese COVID-19 fiscal stimulus package, worth a few trillion Yen, likely to be announced by the end of the week. The stimulus package is aimed at reviving the Japanese economy, which witnessed a decline in consumption in the third quarter.
The US dollar has lately proven to be stronger compared to the local currency Yen, especially after better-than-expected Retail Sales Data posted by the US. The US inflation data last week rose and showed consumer prices surged to their highest rate since 1990. Investors now expect that the Federal Reserve will taper. Some experts even expect that the Fed could potentially hike interest rates sooner than first anticipated.
On Tuesday, US data showed US consumers looked past rising prices and drove Retail Sales higher by 1.7% in October, topping consensus expectations of a 1.4% rise. Additionally, US Industrial Production lifted 1.6% in October, with a higher surprise.
It is to be noted, two regional Federal Reserve chiefs on Tuesday were at odds over the inflation outlook and what it might mean for central bank interest rate policy.
Federal Reserve Bank of St. Louis President James Bullard said the US central bank needs to move more forcefully to confront high levels of inflation. Meanwhile, San Francisco Fed leader Mary Daly stressed that moves to tamp down on price pressures prematurely could cause unneeded pain later should those pressures weaken. It remains to be seen how this plays out and affect the price action of this safe-haven asset.
Traders on Wednesday will closely monitor several US Federal speakers’ speeches and Japan’s National Consumer Price Index Thursday to find impetus.
USD/JPY technical levels