USD/JPY eyes more gains above 148.00 despite solid Japan Retail Sales data

• USD/JPY is expected to deliver decent gains above 148.00 as Fed policy hogs the limelight.
• Japan’s Retail Trade data have outperformed their preliminary estimates.
• BOJ’s continuation of a dovish stance is hurting the Japanese yen.

The USD/JPY pair is hovering around the immediate hurdle of 147.90 in the early Tokyo session. The asset is continuously struggling to surpass the above-mentioned hurdle from Friday and is expected to surpass the same despite solid Japan’s Retail Trade data.

The monthly and annual Retail Trade have accelerated to 1.1% and 4.5% vs. the projections of 0.6% and 4.1% respectively. The Larger Retail Sales have soared to 4.1% against the estimates of 3.6%. Apart from that, annual Industrial Production has climbed to 9.8% in comparison to the consensus of 8.7%.

Meanwhile, the US dollar index (DXY) is displaying signs of volatility contraction in a 110.73-110.85 range as investors have shifted their focus to the interest rate decision by the Federal Reserve (Fed), which is due on Wednesday. The risk impulse is extremely upbeat despite a marginal fall in S&P500 futures as the index ended last week with significant gains amid the quarterly result season. The 10-year US Treasury yields have extended to 4.02% as Fed’s policy is shifting into the spotlight.

This week, the Fed is expected to hike its interest rates one more time by 75 basis points (bps) as price pressures have not reflected serious signs of a slowdown. A fourth consecutive 75 bps rate hike will push the interest rates to 3.75-4.00%.

What is hurting the Japanese yen is the ultra-dovish stance taken by the Bank of Japan (BOJ) in its monetary policy action on Friday. Citing external demand shocks and the inability in returning to pre-pandemic growth levels responsible, BOJ Governor Haruhiko Kuroda kept principle rates unchanged.