USD/JPY Price Analysis – Aug 16, 2023

Daily Price Outlook

The USD/JPY currency pair is keeping its position around the mid-145.00s on Wednesday's Asian session. However, its upward momentum can be attributed to the robust US dollar, which gained strength from the impressive retail sales figures recently released. These numbers signal strong consumer spending and a boost to the overall economy. This positive outlook creates expectations of potential interest rate hikes by the Federal Reserve, enhancing the dollar's appeal to investors and potentially fortifying it further. All these factors are contributing to the gains seen in the USD/JPY currency pair.

USD Strength Continues Amidst Fed Confidence and Strong Retail Sales

The broad-based US dollar continues to build on its recent strong performance, reaching a peak not seen in over two months. This upswing is largely driven by the growing belief that the Federal Reserve (Fed) will maintain higher interest rates for an extended period. This belief gained strength following positive news released on Tuesday.

Accordig to the latest data, Retail Sales for July surged by 0.7%, surpassing both the earlier revised 0.3% and the expected 0.4% increase. Notably, sales excluding automobiles saw an impressive 1% rise, marking the most substantial monthly growth since January. This highlights robust consumer spending and the remarkable resilience of the US economy, bolstering the Fed's hawkish stance. Consequently, this is lending support to the USD/JPY pair.

Factors Influencing USD/JPY Pair and Future Outlook

Moreover, worries about Japan stepping in to prevent their currency from dropping further are holding back the USD/JPY pair's upward movement. Meanwhile, the Bank of Japan's more dovish stance prevents the Japanese Yen from getting too strong. Also, the difference in interest rates between the US and Japan has grown, as people expect the Fed to raise rates by 0.25% more by year-end. This setup suggests that the USD/JPY pair might rise in the short term.

Looking forward, traders are keeping an eye on upcoming US economic reports like Building Permits, Housing Starts, and Industrial Production, which could affect the USD's movement and give direction to the USD/JPY pair. However, all eyes are on the FOMC meeting minutes, as they will strongly impact USD demand in the short term and guide the next move for this currency pair.

USD/JPY - Technical analysis

Yesterday, the USD/JPY pair showcased further positive momentum, inching closer to our anticipated target of 146.00. The pair remains buoyed above the bullish trend line, reinforcing prospects for continued upward movement in both intraday and short-term frames, with the next bullish milestone pegged at 146.80.

Consequently, forecasts suggest a continued bullish trajectory in the near future, bolstered by the EMA50 underpinning the price. However, it's worth noting that a dip below 145.00 could instigate a temporary bearish pullback before the pair resumes its upward climb. Today's trading is projected to oscillate between a support of 144.80 and resistance at 146.40.