- USD / JPY retraces the biggest drop in 12 weeks with a rebound to 105.20.
- Japan’s preliminary industrial production jumped 8.0%, while retail sales fell 3.3% in July.
- The risk tone remains positive, with the S&P 500 Futures refreshing the record above 3515.
- Clarida’s comments from the Fed, second-tier data may guide intermediate moves amid broad US dollar weakness.
USD / JPY refreshes its intraday low while declining to 105.40 after the July data dump in Japan, released early Monday. Even so, the yen pair is printing 0.10% gains on a daily basis while maintaining Friday night’s pullbacks from 105.20. The pair’s latest decline takes a bit of account of the mixed economy and upbeat risk tone sentiment while applauding the overall weakness in the US dollar.
Mixed data is all the rage, Abenomics will continue even in the absence of PM Abe …
Preliminary industrial production rises sharply above forecast of 1.2% and 1.9% before printing 8.0% on MoM. However, the annual figures are disappointing with a contraction of 16.1% against -15.7% expected. Additionally, retail sales were down 3.3% MoM and 2.8% YoY vs. 8.0% and 2.4% respective forecast. USD / JPY rose from 105.47 to 105.54 after the data before falling to 105.42 at press time.
Besides the mixed data, traders in the pair also paid little attention to the recovery in market sentiment. While presenting the same picture, the S&P 500 Futures refreshes the record to 3,520 as 10-year US Treasury yields pause around 0.72% after falling 2.2 basis points (bps) on Friday.
In the context, the uncertainty surrounding the US stimulus matches the Federal Reserve’s desire to continue to pump the US dollar. Elsewhere, the coronavirus (COVID-19) crisis continues with the latest headlines suggesting a rush for a vaccine. Moreover, the fight between the United States and China and the willingness of Japanese Prime Minister Shinzo Abe to step down on health grounds appears to defy optimists.
It should be mentioned that the quote was well offered on Friday after Prime Minister Abe crossed paths to announce his resignation due to health concerns. However, he will remain the national leader unless a secure candidate is found. On this subject, the Japan Times recently quoted several economists as saying that the next Japanese leader will likely maintain the basic framework of Abenomics.
Looking ahead, comments from Federal Reserve Governor Richard Clarida will be watched closely to reconfirm President Jerome Powell’s bearish bias. Japanese data on housing, construction and consumer confidence are also important, as is the Dallas Fed’s Manufacturing Business Index in the United States. While the pessimistic comments from the Fed policymaker may put further downward pressure on the pair, mixed forecasts for the programmed economy are troubling the bears.
Unless bouncing above trendline of support turned into resistance spreading out from July 31st, at 105.75 now, USD / JPY becomes vulnerable to refresh monthly low near 105.10 .
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