USD/JPY rallies towards 111 as DXY tests 94 post-US data

The USD/JPY pair gathered a strong bullish momentum in the early NA session and refreshed its weekly high at 110.85. As of writing, the pair was trading at 110.80, gaining 1.05% on the day.

The pair's recent upsurge seems to be fueled by a strong greenback rally, which was triggered after the data from the U.S. came in above the market expectations. According to the data released by the U.S. Census Bureau on Tuesday, retail sales in the U.S. grew by 0.6% on a monthly basis in July. Furthermore, June's data was also revised up to 0.3% from -0.2%. Both pointing to increased consumer spending, which would eventually translate into higher inflation. 

Additionally, the most recent Empire State Manufacturing Survey, conducted by the Federal Reserve Bank of New York, showed that the headline general business conditions index reached its highest level in three years as it increased to 25.2 in August from 9.8 in July. 

After the data, the US Dollar Index jumped to its highest level in two weeks at 94.01. At the moment, the index is at 93.95, up 0.67% on the day. Moreover, major global equity indexes continue to build on their solid gains from yesterday, suggesting that the risk appetite staying alive on Tuesday. 

Technical outlook

The pair may need to make a decisive break above 111 (psychological level) to extend its gains towards 111.50 (100-DMA) and 112.30 (200-DMA). On the downside, supports could be seen at 110.00 (psychological level), 109.55 (Aug. 9 low) and 108.75 (Aug. 11 low).

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Today's data from the U.S.

• US: Retail sales for July 2017 were $478.9 billion, an increase of 0.6% from June
• NY Fed: Business conditions index climbed fifteen points to 25.2, highest level in nearly 3 years
• US: Prices for US imports edged up 0.1% in July