USD/JPY clings to mild losses below 139.00, traces sluggish yields ahead of US Retail Sales

• USD/JPY grinds near intraday low, remains pressured for the second consecutive day after bouncing off two-month low.
• Traders from Tokyo fail to propel momentum despite returning from long weekend.
• Sluggish markets, mixed concerns about BoJ versus Fed divergence keep Yen prices dicey.
• Cautious mood, US Dollar’s retreats lure sellers ahead of US data.

USD/JPY holds lower grounds near the intraday bottom surrounding 138.50 amid early Tuesday morning in Europe. In doing so, the Yen pair fades the last Friday’s corrective bounce off the two-month low amid sluggish market conditions. That said, Japanese trader’s return from the holiday failed to infuse the market’s volatility as traders await the US Retail Sales and Industrial Production for June amid mixed feelings.

The risk-barometer pair’s latest weakness portray the markets’ cautious optimism as fears of the US-China tussle recede after the recent efforts from Washington to re-establish relations with Beijing via frequent visit. Additionally, mixed concerns about the global central bankers’ next moves, with the looming Fed rate hike in July, also prod the USD/JPY pair traders.

It should be noted that the Bank of Japan (BoJ) policymakers keep singing the tunes to defend the easy-money policy even if the market players anticipated and exit from ultra-low interest rates and moderation to the Yield Curve Control (YCC) policy.

Elsewhere, Friday’s hawkish Fed concerns couldn’t last long as the previous day’s US data fail to defend the optimism surrounding the world’s largest economy, earlier favored by the top-tier consumer-centric numbers. On Monday, New York (NY) Empire State Manufacturing Index for July eased to 1.1 from 6.6 prior and 0.0 market forecasts. The data failed to inspire the US Dollar Index (DXY) sellers initially before reversing Friday’s recovery, backed by the upbeat prints of the University of Michigan’s (UoM) Consumer Sentiment Index and consumer inflation expectations for July.

It’s worth noting that the market sentiment is also sluggish and hence restricts the immediate moves of the USD/JPY pair. While portraying the mood, the S&P500 Futures dribble at the highest level since April 2022, down 0.10% intraday near 4,565 by the press time, whereas the US 10-year and two-year Treasury bond yields cling to mild losses near $3.80% and 4.73% in that order. It’s worth noting that the US Dollar Index (DXY) remains pressured amid cautious optimism, as well as due to Monday’s downbeat data, whereas commodities and Antipodeans print mild gains of late.

Looking ahead, the US Retail Sales for June, expected to rise to 0.5% versus 0.3% prior, will be crucial to watch for clear directions of the USD/JPY pair. Also important will be the US Industrial Production for June, expected -0.1% versus -0.2% prior, as well as the US-China headlines and the bond market moves as Japan returns from a long weekend.

Technical analysis

A failure to cross the previous support line stretched from late March, around 139.50 by the press time, directs USD/JPY bears toward a convergence of the 100 and 200 SMAs near 137.00.