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  • Wall Street’s main indexes post modest gains in early trade.
  • Retail sales in July rose 0.7% to beat analysts’ estimates.
  • US Dollar Index extends gains above 98 in NA session.

Following a drop to 105.80 earlier in the day, the USD/JPY pair reversed its direction and rose above the 106 handle in the early trading hours of the North American session supported by broad-based USD strength and slightly improved market sentiment. As of writing, the pair was up 0.3% on the day at 106.20.

On the back of upbeat retail sales data and strong second-quarter earnings figures from retail-giant Walmart, major equity indexes in the US started the day modestly higher and now continue to extend their gains, making it difficult for the safe-haven JPY to find demand. The US Census Bureau today reported that retail sales in July increased by 0.7% to beat the market expectation of 0.3%.  

Additionally, the improved market sentiment allows the 10-year US Treasury bond yield, which slumped to its lowest level in nearly three years at 1.52% earlier today, to erase its losses and support the USD/JPY’s rebound.  

DXY gains traction

On the other hand, the Greenback gathered strength in the last hours to provide an additional boost to the pair. Although the US Dollar Index (DXY) struggled to break above the 98 mark despite the inspiring data, the fact that the EUR/USD pair fell sharply in the last hour following reports of the ECB announcing a stimulus package that could overshoot investors’ expectations caused the DXY to rise to its highest level since August 2 at 98.24. At the moment, the index is up 0.22% on the day at 98.17.

Technical levels to watch for