USD/JPY SEES UPSIDE TO NEAR 130.00 AS FED-BOJ POLICY DIVERGENCE DEEPENS, US RETAIL SALES EYED

• USD/JPY is facing a barricade around 129.45 ahead of the US Retail Sales.
• Fed’s Powell has indicated two more rate hikes in 2022.
• The ultra-loose monetary policy from the BOJ will keep the yen bulls passive.

The USD/JPY pair is gradually moving higher in the early European session and is expected to touch the psychological figure of 130.00 after violating intraday’s resistance at 129.45. The asset has formed a bullish Open-Rejection reverse as the bearish open move met with a responsive buying action, which drove the asset above the opening price to a high of 129.45.

The Federal Reserve (Fed) is hand chasing to squeeze liquidity from the economy. Rising inflationary pressures along with a tight labor market are hitting the paychecks of the households. Higher energy bills and food prices are hurting the real income of the households, which is diminishing their confidence in the economy. So investors should brace for a spree of interest rate hikes by the Fed.

Also, Fed chair Jerome Powell in his interview with Marketplace national radio program stated that the Fed could feature two more rate hikes by 50 basis points (bps) in its next two monetary policy meetings. And, the statement seems clearly responsible for the broad-based strength in the greenback.

On the Japanese front, the Bank of Japan (BOJ) will stick to its conservative monetary policy as BOJ’s Governor Harihuko Kuroda stated that the economy has failed in achieving its pre-pandemic growth levels. The continuation of a prudent monetary policy will keep the yen bulls on the tenterhooks.

In today’s session, investors are bracing for outperformance from the US Retail Sales data amid higher interest rates. The monthly US Retail Sales are seen at 0.7% against the prior print of 0.5%.