USD/JPY stands neutral above 149.50, markets await Retail Sales figures from the US

• USD/JPY continues to side-ways trade in the 149.00 - 150.00 range, as investors await fresh catalysts.
• Retail Sales from the US from September will be released on Tuesday.
• BoJ's prospects of intervening in markets to stop the Yen’s depreciation may limit the upward potential.
• The Fed’s dovish narrative is taking relevance and is limiting the USD’s upside potential.

On Monday, the USD/JPY traded with mild gains above 149.50, mainly driven by the JPY’s weakness. Likewise, the Greenback is performing poorly against its rivals as its DXY index consolidates last week’s gains after rising above 106.00.

Retail Sales figures from the US for September will provide markets with additional data on the US economy to continue placing their bets on the Federal Reserve's (Fed) future decisions. In the meantime, according to the World Interest Rates Probabilities (WIRP), tightening expectations are low, mainly driven by the Fed’s doves, which refrained from committing to another rate hike in last week's Fed meeting minutes, but the US is still not showing signs of cooling down which would push the Fed to hike one more time in this tightening cycle.

Comments from Thomas Harker were interpreted as dovish on Monday after he reiterated that the Fed is “likely” done with rate hikes. Several other officials will be on the wires on Tuesday and Wednesday, including Michelle Bowman, Christopher Waller, and John Williams, and dovish comments may add selling pressure to the green currency.

The Bank of Japan (BoJ) is attached to its dovish stance, and markets are pricing in a liftoff in 2024, so monetary policy divergences between its peers leave the JPY vulnerable. On the positive side, investors are expecting the bank to intervene to stop the depreciation of the Yen, which could limit the potential of the upward movements of the pair.

USD/JPY Levels to watch 

The USD/JPY suggests a neutral to bearish technical outlook in the short-term as bullish momentum wanes. The Relative Strength Index (RSI) has turned flat above its midline, while the Moving Average Convergence (MACD) displays stagnant red bars. The pair is still above the 20,100,200-day Simple Moving Averages (SMA), however, highlighting the continued dominance of bulls on the broader scale.

 Support levels: 149.00 (20-day SMA), 148.00, 147.30.

 Resistance levels: 150.00, 150.50, 151.00.

USD/JPY Daily Chart