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  • USD/JPY extends latest recovery despite upbeat Japanese Retail Trade data.
  • Japan’s Retail Trade beat expectations in June, risk-off also in play.
  • US Fed keeps further easing on the table, fiscal action more likely despite deadlock in talks.
  • BOJ policymakers suggest furthering of negative rates if needed after Nikkei signaled downgrade in Japanese GDP forecast.

USD/JPY takes rounds to 105.00 as Tokyo opens for Thursday’s trading. The pair recently picked up the bids despite the US dollar’s broad weakness after the Federal Reserve’s bearish outcome. In doing so, the quote also ignores upbeat Japanese data and the market’s risk aversion.

Japan’s Retail Trade recovered from -6.5% forecast and -12.5% revised prior to 1.5% in June. Further details suggest that the monthly prints of seasonally adjusted figures grew past-7.1% market consensus to 13.1%. The data adds to the broad strength of the Japanese yen versus its US counterpart. Though, the market is more concerned about the later issue off-late.

US dollar weakness gains more attention…

Be it the worsening of the coronavirus (COVID-19) conditions or the policymakers’ deadlock over phase 4 of the stimulus package, not to forget the bearish Fed, the US dollar has to bear the burden of everything and trade south.

America is unfortunately the biggest victim of the pandemic with over 4.0 million new cases and death toll crossing 665K. The second wave has already hit re-opening optimism and is pushing the decision-makers, be it at the Federal Reserve (Fed) or political front, to combat the pandemic. However, the delay in announcing the much-anticipated aid package and the central bank governor’s bearish bias, highlighting the virus fears, offered the latest weakness to the greenback.

On the other hand, Bank of Japan (BOJ) Deputy Governor Masayoshi Amamiya said on Wednesday that they won’t rule out a deepening negative rate if the central bank eases further. Further, Nikkei came out with the news saying that the Japanese government will forecast for the years 2020/21 a real Gross Domestic Production contraction of around 4.5%, revising its pre-coronavirus projection for a 1.4% growth. Elsewhere, Fitch downgraded the Asian major’s credit outlook to negative while maintaining its sovereign rating at ‘A’.

Amid all these plays, US 10-year Treasury yields stay on the back-foot below 0.58% whereas S&P 500 Futures drop 0.10% to 3,250 by the press time.

Looking forward, the pair traders will keep eyes on the preliminary readings of the second quarter (Q2) US GDP readings, expected -34.1% versus -5.0% prior, for fresh impulse. However, headlines concerning the virus and US fiscal package talks, not to ignore Sino-American tussles, will keep entertaining the markets.

Technical analysis

Wednesday’s bearish spinning top candlestick on the daily chart highlights the pair traders’ indecision, which in turn gains support from oversold RSI conditions to trigger the latest bounce off fresh lows since March 13. Though, bulls are less likely to be convinced unless witnessing a clear break of 106.00. Meanwhile, a downward sloping trend line from May 29, at 104.48 now, grabs the sellers’ immediate attention.