USD/JPY pushes lower after modest Japan retail sales data
- The USD/JPY pair declined slightly after the latest Japan retail sales data.
- The country’s retail sales rose by 8.2% on a YoY basis in May.
- The data points to slower recovery of the Japanese economy.
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The USD/JPY pair retreated in early trading after the relatively modest Japanese retail sales numbers. The pair fell to 110.45, which was the lowest level since Monday last week.
Japan retail sales
The Japanese economy received a boost in May as households loosened their pockets. According to the government’s statistics agency, retail sales rose by 8.2% in May. This was a bigger increase than the median estimate of 7.9% and was the third straight month of increases.
Still, data show that the ongoing trends in consumption remain lower than in other countries like the United States. For one, the sales declined by 0.4% on a month-on-month basis.
Analysts expect that this trend will continue in the coming month as the country hosts the Olympics. These will likely be the least attended games in modern history because of the pandemic.
The USD/JPY also reacted to the relatively weak Japan employment numbers. According to the country’s statistics office, the unemployment rate rose from 2.8% in April to 3.0% in May. This increase was worse than the expected 2.9%. In the same period, the jobs to applications ratio remained at 1.0.
Analysts expect that the Japanese economy will have a slower recovery than in other countries. The median estimate is for the economy to grow by 0.3% in the second quarter after rising by 3.9% in the first quarter.
The USD/JPY will react to the upcoming US consumer confidence numbers. Analysts polled by Reuters expect data from the Conference Board will show that confidence rose from 117.2 to 119.0. This increase is mostly because of the ongoing reopening and the better work prospects for most people. Later this week, the pair will react to the Tankan data from Japan and the US non-farm payrolls.
USD/JPY technical forecast
The USD/JPY pair has been under pressure in the past few days. This has seen it decline to the 110.50 level, which is below the 25-day moving average. The price is also between the middle and lower lines of the Bollinger Bands while the Relative Strength Index (RSI) has dropped to 45. Therefore, the path of least resistance for the pair is lower. This will likely see it drop to the support at 110.00.
