USD/JPY rebounds sharply as US Dollar attempts recovery, spotlight shifts to US Retail Sales

• USD/JPY has picked strength around 138.50 following the footprints of the US Dollar Index.
• Hopes of only one more interest rate hike from the Fed have elevated due to supportive economic indicators.
• S&P500 futures have discovered some losses in Europe, portraying a cautious market mood.

The USD/JPY pair has recovered firmly to near 138.85 in the London session. The asset was demonstrating a non-directional performance amid an absence of a potential economic trigger. The recovery move has come following the footprints of the US Dollar Index (DXY). A power-pack action in the major would be propelled by the release of the monthly United States Retail Sales data.

S&P500 futures have discovered some losses in Europe, portraying a cautious market mood. US equities are expected to face tough times as the second-quarter result season has kicked off. Investors will keep an eye on banking and technology stocks amid bleak economic activities due to higher interest rates from the Federal Reserve (Fed).

The US Dollar Index (DXY) is making some serious efforts for delivering a break above the immediate resistance of 100.00. A decisive move would trigger a short-term recovery and might impact the appeal for the risk-perceived currencies. The yields offered on 10-year US Treasury bonds have dropped sharply to near 3.78%.

Hopes of only one more interest rate hike from the Fed have elevated due to supportive economic indicators. June’s inflation report has softened sharply as prices of second-hand automobiles have dropped and was sufficient to offset a mild increase in gasoline prices. The tight labor market has released some heat as Fed remained aggressively hawkish and now investors are shifting their focus toward the US Retail Sales data.

On the Japanese Yen front, the interest rate decision by the Bank of Japan (BoJ) will be keenly watched. Bloomberg reported that BoJ officials will likely raise their inflation forecast above 2% for this fiscal year at their July meeting, but their view for the following year is largely unchanged and may even be nudged down.

Investors should note that Japanese markets were closed on Monday on account of Marine Day.