USD/JPY calm ahead of US retail sales

The Japanese yen is drifting on Wednesday. In the European session, USD/JPY is almost unchanged at 147.77.

It’s a busy day in the US, with the release of retail sales, the producer price index and unemployment claims. The highlight will be retail sales, which is expected to have bounced back in February to 0.8% m/m, erasing the 0.8% decline in January. Consumer spending has been a key driver of a robust US economy and another weak reading could cause the Federal Reserve to hold back on rate cuts.

The Fed is virtually guaranteed to pause at the March meeting and the probability of a June cut is at 70%, according to the CME’s FedWatch tool.

Will the BoJ make any moves at the March meeting?

The Bank of Japan meets next week and like previous meetings, investors will be on the alert for any moves by the central bank. Senior officials at the BoJ have been hinting at a shift in policy after years of maintaining an ultra-loose monetary policy, which has left the BoJ as the only major central bank with negative interest rates.

The BoJ isn’t about to show its cards, but most analysts are circling the April meeting as the date for an exit from negative rates, with an outside possibility of such a move at next week’s meeting.
The annual wage negotiations between unions and employees end this week and waiting until April would give the BoJ more time to digest the expected wage increase. As well, the BoJ will release its quarterly economic outlook in April and could explain any policy changes through that report.

USD/JPY Technical

• USD/JPY tested support at 147.68 earlier. Below, there is support at 147.31
• 148.12 and 148.49 are the next resistance lines

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