FxWirePro: USD/JPY edges lower ahead of key U.S. retail sales data, souring risk sentiment raises demand for yen

USD/JPY chart on Trading View used for analysis

• USD/JPY trades slightly weaker as we write, down 0.09% at 113.50.
   
• Federal Reserve Chairman Jerome Powell at a speech overnight downplayed volatility.
   
• Powell said gave no indication recent volatility will play into the U.S. central bank’s next policy decision. 
   
• He expressed confidence in U.S. economic strength and said that markets will have to get used to the idea that the central bank could raise rates at any time starting in 2019. 
   
• Fed Policy makers raised interest rates three times this year and a fourth increase is projected for next month.
   
• That said, risk aversion and the resulting demand for yen keeps downside pressure.
   
• Further, the treasury yields slipped lower, weakening the bid tone around the greenback. 
   
• Focus now on U.S. retail sales, due at 13:30 GMT. A big beat on expectations, highlighting the strengthening domestic demand could see reversal.
   
• Technical indicators are turning slightly bearish on the daily charts. 5-DMA has turned and Stochs are on verge of a rollover from overbought levels.
   
• Upside capped at 5-DMA and we see scope for test of 20-DMA at 113.21. Break below will see test of 23.6% Fib at 112.20.

Support levels - 113.21 (20-DMA), 113, 112.93 (cloud top)

Resistance levels - 113.70 (5-DMA), 114, 114.55 (Oct 4 high)

Recommendation: Stay short on upticks, SL: 113.75, TP: 113.25/ 113/ 112.60

For details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex.