USD/JPY dips below 154.00, higher US yields are keeping bears in check

• The Dollar corrects lower after a six-day rally.
• The widening gap between US and Japanese Treasury yields is likely to keep US downside attempts limited.
• US Retail Sales data, due later today might provide an additional boost to the Dollar.

The US Dollar retreated slightly on Tuesday, after a nearly 3% appreciation in a six-day rally. The current reversal looks like a corrective reaction, which will probably be a mild one considering the US Treasury yield’s rally.

The benchmark US 10-year yield is appreciating for the seventh consecutive day to reach levels past 4.40%. The widening gap between the US and the Japanese bond yields is likely to act as a headwind for Yen’s recovery.

Strong US data is supporting the USD

US macroeconomic data points out a strong growth in the fourth quarter. Investors remain confident that the Fed will cut rates in December although the bank might highlight the storing economic momentum and the higher inflation to adopt a more hawkish forward guidance.

The Bank of Japan, on the contrary, is expected to keep rates on hold on Thursday, after having hinted at a 25 bps cut until last week. Some dovish comments by BoJ officials suggest that the bank might wait till January to assess the implications of Trump´s policies in the US.

In the calendar today, US Retail Sales are expected to show a buoyant consumption. This, coupled with the strong services activity figures released this week, are likely to keep US Dollar downside attempts limited, at least until the outcome of the Fed meeting.