USD/JPY retreats from weekly highs to 110.40 as USD loses strength

USD/JPY pulled back more than 30 pips from weekly highs amid a retreat of the US dollar. The greenback trimmed part of the gains that followed an upbeat US retail sales report. 

US: Consumer demand started the third quarter on a strong footing - Wells Fargo

Yields drive USD/JPY away from highs 

The dollar and US bond yields soared after the report. The 10-year reached 2.282% (1-week high) and during the last hours moved off daily highs. The USD/JPY also retreated and fell from 110.84, the strongest since August 7, to 110.38. 

At the moment, it trades at 110.50, 90 pips above Monday’s close. It is the second daily rise in a row for the pair that accumulates a gain of 150 pips so far over the week. Today’s rally pushed the price back into positive territory for the month. 

The greenback continues to recover after July’s decline, supported by the latest round of US data and also by expectations about another rate hike from the Federal Reserve before year-end.  New York Fed President, William Dudley, told yesterday that another hike in 2017 was likely, if the economy evolves as expected. On Wednesday, the minutes of the latest FOMC meeting will be released and could represent a challenge to the US dollar. 

USD/JPY Technical levels 

To the upside, resistance levels might be located at 110.85/90 (daily high) 111.05 (Aug high) and 111.35. On the flip side, support could be seen at 110.35/40 (American session low), 109.80 (Aug 14 high) and 109.55 (Aug 9 low).