The dollar/yen is trading flat on Thursday as traders await the direction of a slew of U.S. economic data, including the Philly Fed Manufacturing Index, weekly jobless claims, existing home sales and the leading index of the Conference Board.
The Forex pair jumped early in the session on Wednesday on flat-to-better U.S. retail sales data, but gave up some of those gains after the Fed’s July meeting minutes came out less hawkish. provided that.
At 04:12 GMT, USD/JPY is trading at 135.043, down 0.030 or -0.02%. On Wednesday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $69.25, down $0.42 or -0.60%.
U.S. retail data indicated that activity remained flat in July as consumers shifted their spending online and lower fuel prices contributed to lower gas station sales. Traders weren’t too shaken by the news and actually raised the likelihood of a rate hike by 75 basis points at the Fed’s September meeting.
However, the Fed minutes offered an excuse for investors to cut the top a bit lower. I’ve seen the minutes described as ‘dovish’, ‘less hawkish’ and ‘hawkish’. This type of spread can mean anything, but it essentially suggests that there is still plenty of time for traders to decide what the Fed is going to do at its September 21 meeting.
The Fed delivered hawkish news as minutes showed policymakers would continue their aggressive hike campaign until it can get inflation under control.
But the hawkish tone was toned down after minutes showed Fed policymakers also signaled it may slow the pace of its tightening soon, while acknowledging some weakness in parts of the economy and a risk decline in GDP growth.
The main trend is down according to the daily swing chart. A trade through 135.568 will change the main trend to the upside. A move to 131.734 will signal a resumption of the downtrend.
Support is a major retracement zone between 132.876 and 131.338. Resistance is a short-term retracement zone between 134.901 and 135.960.
The trigger point for an upward acceleration is the short-term Fibonacci level at 135.960. The daily chart indicates that there is plenty of upside with 139.389 as the main upside target.
Traders will be watching US economic data for its impact on US Treasury yields and the likelihood of a 50 or 75 basis point rate hike. Currently, they stand at 61% and 39% respectively.
A rise in Treasury yields and an increase in the odds of a 75 basis point rate hike could be enough to shift the main uptrend and trigger a potential breakout higher.