• US retail sales rose 1.0% in July.

• The likelihood of a 50 bps Fed rate cut in September dropped to 25%.

• US jobless claims fell last week to 227,000.

The USD/JPY outlook paints a bullish picture as the dollar trades near a two-week high against the yen after positive US sales data. Meanwhile, the rate-sensitive yen was weak as US Treasury yields rose amid a decline in Fed rate cut expectations. At the same time, the outlook for Bank of Japan rate hikes remained clouded due to political uncertainty.

The US dollar made a solid bullish move on Thursday after US retail sales rose 1.0% in July. This increase was much bigger than the forecast of a 0.3% gain. Moreover, it showed that the US consumer was resilient. As a result, the likelihood of a 50 bps Fed rate cut in September dropped to 25%. Meanwhile, US Treasury yields rose, weighing on the yen.

Another report revealed that US jobless claims fell last week to 227,000, below forecasts for 235,000. The report reduced fears that the labor market was deteriorating. Low unemployment points to high demand and a tight market.

The upbeat US economic reports followed inflation data showing a moderate increase. As a result, the market is optimistic that the Fed might achieve a soft landing.

On the other hand, the yen was fragile on Friday amid political uncertainty in Japan. Prime Minister Fumio Kishida recently decided to step down, leaving a big gap. He greatly supported the Bank of Japan’s recent hiking cycle. Consequently, analysts believe the BoJ might pause until there is more political certainty before hiking interest rates.

USD/JPY key events today

There will be no key economic reports from the US or Japan, so investors will continue absorbing yesterday’s reports.

USD/JPY technical outlook: Bulls approach 0.618 Fib retracement level

On the technical side, the USD/JPY price has made a sharp, bullish move, detaching from the 30-SMA and the 0.382 Fib level. At the same time, the RSI moved nearer the overbought territory, indicating solid bullish momentum.

The price is approaching a solid barrier comprising the 150.03 resistance and the 0.618 Fib level. Since the bullish bias is strong, the price might soon breach this barrier to make new highs. Such a move would clear the path for bulls to revisit the 155.01 resistance.

https://www.forexcrunch.com/blog/2024/08/16/usd-jpy-outlook-dollar-pushes-to-2-week-high-on-solid-sales/