USD/JPY stays calm near 108.20 ahead of US retail sales data

• 10-year US T-bond yield continues to push lower.
• Wall Street looks to open the day in the negative territory.
• US Dollar Index advances to weekly highs above 97.

The USD/JPY pair is having a tough time setting its next short-term direction on Friday as the risk-off flows allow the safe-haven JPY to stay resilient against the dollar. As of writing, the pair was trading at 108.24, losing 0.14% on a daily basis.

Escalating global geopolitical tensions amid the ongoing protests in Hong Kong and the oil tanker attacks in the Gulf of Oman continue to weigh on the market sentiment on the last day of the week. Confirming the flight-to-safety, stronger demand for safer US Treasury bonds dragged the yields lower with the 10-year reference losing more than 1% on the day. Moreover, major European indexes are suffering heavy losses and the S&P 500 Futures is losing 0.3% to suggest that Wall Street is likely to start the day in the negative territory.

Despite the sour mood, however, the broad USD strength ahead of today's critical macroeconomic data releases, retail sales, industrial production, and the University of Michigan Consumer Confidence Index, from the U.S. helps the pair limit its losses. At the moment, the US Dollar Index, which touched a weekly high of 97.20 in the last hour, was up 0.12% on the day at 97.15. The dollar's strong performance against its major European rivals seems to be providing the fuel to the USD's rally.

Previewing today's sales report, "Although we expect sales at gasoline stations to remain supportive of the headline figure, it will be so at a lower magnitude reflecting the stabilization in gasoline prices. Furthermore, we anticipate sales in the key control group to rebound modestly at 0.2% m/m following the unexpected flat print in April,” TD Securities analysts said.

Technical levels to watch for