USD/JPY oscillates around 139.00, upside looks likely on firmer consensus for US Retail Sales

• USD/JPY is going through an initiative buying structure that will extend its gains further.
• Solid fuel prices and CPI figures are strengthening the odds of higher US Retail Sales.
•  The BOJ needs to step up the wage price index to keep the inflation rate above 2%.

The USD/JPY pair is displaying back and forth moves in a narrow range of 138.77-139.12 in the early European session. The asset has turned sideways after a vertical upside move and more upside looks likely as the US dollar index (DXY) is attempting a rebound after a corrective move. The DXY is expected to move higher strongly after overstepping the round-level resistance of 109.00.

Investors are channelizing liquidity into the greenback on expectations for higher US Retail Sales, which will release in the New York session. As per the market forecast, investors should brace for a higher reading at 0.8% than the prior release of -0.3%.

The investing community acknowledged with the upbeat fuel prices in June and higher energy bills would have driven the Retail Sales in a similar manner. Also, the improved Consumer Price Index (CPI) and Producer Price Index (PPI) reports adding to the upside filters.

However, upbeat Retail Sales data could be lucrative for the DXY but not for the economy as the data is not driven higher quantity-wise. Downbeat sales numbers for durable goods may also put pressure on the demand forecasts.

On the Tokyo front, yen bulls will remain weaker as a continuation of an ultra-loose monetary policy by the Bank of Japan (BOJ) will widen the Federal Reserve (Fed)-BOJ policy divergence. The BOJ is highly required to maintain its inflation rate above 2% and in order to address the same, it needs to paddle up the wage-price level meaningfully.