USD/JPY is steady at multi-week highs near 148.00 ahead of US Retail Sales data

• The US Dollar has reached fresh six-week highs at 148.00. 
• The widening gap between US and Japanese bond yields, as the market pares back Fed cuts’ hopes, is hurting the Yen.
• Later today, the US Retail sales and more Fed speakers might give a fresh impulse to the USD. 

The US Dollar is consolidating gains below the 148.00 area on Wednesday. The pair has appreciated nearly 2% so far this week, with Fed policymakers pushing back hopes of interest rate cuts in the coming months.

On Tuesday, Fed Governor Christopher Waller backed last week’s comments from some of his colleagues warning that is too early to discuss rate cuts with inflation still at high levels.

Higher US Treasury yields are hurting the Yen

Investors’ reassessment of the timing and the intensity of the Fed’s easing cycle has pushed US Treasury yields somewhat higher, increasing the gap with the Japanese bonds and weighing on the Yen.

In Japan, the weak inflation and wage growth levels seen last week have eased pressure on the BoJ to exit its ultra-loose policy. This practically discards any relevant decision at next week’s monetary policy meeting, which is an additional weight on the JPY.

The focus today is on December’s US Retail sales, which are expected to have improved by 0.4%, after a 0.3% reading in November. After that, an array of Fed speakers will provide more info about the bank’s policy plans.

The near-term trend remains bullish, after having breached the 61.8% retracement of the late 2023 sell-off. Immediate resistances are at 148.00 and 148.50. Supports lie at 147.11 and 146.35.

Technical levels to watch