Dollar/yen initially had a positive start to the week as tensions around North Korea eased and the greenback attempted to make a comeback. However, the terror attack in Barcelona, as well as the Trump troubles, triggered a risk-off sentiment that helped the yen.

USD/JPY fundamental movers

Mixed signals from the US

The most important data point coming out of the US, retail sales, beat expectations. That was much needed for the US dollar. However, the Fed’s meeting minutes seemed to show hesitation.

With a fading out of tensions with North Korea, the yen lost support. Nothing has materially changed around the rogue nation, but the focus of the US President has moved elsewhere. Yet Trump’s failure to fully denounce the terror in Charlottesville triggered the disbanding of two economic councils and rumours that Gary Cohn would quit. This hurt the dollar.

And while the tensions around North Korea faded, the horrific terror attack in Barcelona dampened the mood. And a damper mood helps the safe-haven yen.

In Japan, we learned that the economy grew at a whopping rate of 1% q/q. However, it was not enough for the yen. Once again, we have seen how the yen ignores the data and moves by the ebb and flow of risk.

Jackson Hole and a few other events

The big event of the week happens on Friday and Saturday, with the Jackson Hole Symposium. Central bankers descend on the resort in Wyoming and the speech by Janet Yellen is closely watched. Will she provide further hints about rate hikes? Also, watch out for housing data and durables goods orders.

Japan will release inflation data on Friday, with core CPI expected to remain subdued. The BOJ’s own core CPI number, published at 5:00, is of higher importance. Any rise from the 0.3% level seen in July will be blessed, but chances are slim to see a significant impact on markets.

Key news updates for USD/JPY

Updates:

USD/JPY Technical Analysis

115.35 is the next line of resistance in case the pair break the cycle high of 114.30 which remains critical resistance after capping the pair back in May. The break to 114.50 did not go very far.

113.50 was a temporary line of resistance on the way up in July. 113.70 was a separator of ranges in June.

112.20 used to be important in the past. It is closely followed by 111.80, which capped the pair in May.

Looking down, 110.70 was a separator of ranges in June and remains important. 109.60 was a gap line in late April, a gap that was never closed.

In June, the pair found support several times at 109.10 and this also works as support. Further below, the cycle low of 108.10 is of high importance. Looking lower, we are back to levels seen in November, but the door is basically open to 105.

USD/JPY Daily Chart

(Click on image to enlarge)

USD/JPY Sentiment

I remain bearish on USD/JPY

While the Japanese yen lost some of its safe-haven appeals, the dollar remains weaker. The Fed is in no hurry to raise interest rates.