Retail Sales for August, issued on Thursday, had been forecast to fall for the second month. Consumer outlook in the Michigan survey had previously plunged to a decade low for the month. Instead, outside of automobile sales which have been restricted by shortages, consumers had their most avid month since January. The USD/JPY duly reversed and by Friday at 109.98 was just points above Monday’s open. The USD/JPY and Treasury yields finished the week modestly higher despite somewhat conflicting directions from US economic data. Consumer price gains in the US moderated slightly in August, giving the Federal Reserve additional logic for delaying their bond taper. The USD/JPY dropped on the Tuesday CPI release and continued lower on Wednesday to the week's low.

BULLISH AND BEARISH CONDITIONS/ POSSIBILITIES :

If the Fed announces its taper schedule, the USD/JPY and Treasury yields will rise. The size of the increases depends on the details of the timing and amount. For the USD/JPY 110.00 should be in easy reach. The 10-year yield could stretch towards 1.50%. If Mr. Powell repeats the year-end promise but declines to specify the contents, the upward bias will be reinforced but major movement will be contingent on US data. The highly unusual circumstance of three moving averages (MA) within10 points of each other just below the market is as clear an indication as possible of the USD/JPY's lack of direction. The 21-day MA is at 109.88, the 50-day MA is 109.90 and the 100-day is at 109.85. The USD/JPY closed at 109.95 on Friday, one point from where it opened the week. The technical structure, close and frequent, and the clustered moving averages, are indicators that the USD/JPY is ripe for a move. The most likely catalyst is the FOMC meeting on Wednesday.

USDJPY

Sep 18 2021

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