- A continuation pattern coming to fruition; immediate risk will towards May’s 111.39 peaks.
- Plenty of Japanese data on tap in Asia today, noting yesterday’s data related spike in the yen.
USD/JPY rallied as risk sentiment picks up during the Noth American session’s second half; we have seen a pick up in stocks with the S&P 500 now up 0.72% and the DJIA up 0.58% while the NASDAQ leads the back, higher by over 0.90%. USD/JPY has surpassed yesterday’s highs of 110.48 and has made a high of 110.65, (best since June.20/US 10-year yields firm at the top of the 2.82-2.85% range).
The pair picked up yesterday on headlines that Trump’s administration will be less harsh with tariffs Chinese imports. Exporter offers kept a lid on advances, but bulls have kept up the pressure and 110.50 is starting to give way.
“Headline risk remains elevated as market participants assess the ongoing impact of trade policy uncertainty. Yield spreads have continued to narrow in a JPY-supportive manner but risk reversals are showing signs of stabilization,” analysts at Scotiabank argued.
US growth was trimmed to 2% from 2.2%, but traders focus on pick up in Spring
As for data today, the growth in the U.S. economy in the first quarter was trimmed to 2% from 2.2%, (notably, lower spending on health care and a somewhat smaller buildup in inventories). However, this reading wouldn’t be too troublesome for the dollar as traders are more inclined to focus on the stronger economic performance this spring, (heading towards the fastest quarterly growth in 15 years).
An additional focus today came with weekly jobless claims that rose by 9,000 in the latest week, a bigger increase than had been expected, although they remain near their lowest level in decades. For later today, Tokyo CPI, Japnese Industrial Production and unemployment are on tap in Asia, (note that the yen strengthened yesterday into Tokyo’s open on retail sales numbers).
USD/JPY level
“Technically, the 200 day MA (110.20) remains an important level of near-term congestion for USDJPY. The one-month symmetrical triangle appears to be approaching a resolution,” analysts at Scotiabank explained.
On that continuation pattern, the immediate risk will towards May’s 111.39 peaks. Note, 111.50 is an option barrier that stood strong previously, sighted just above the 111.39 May high in a congested area where the 161.8% of May low & 76.4% of the May drop was located. Further out, the 112.30’s, (Fibos at 112.22/33) remain key upside target. On a correction, the Tenkan prop is located at 109.19 that falls below the 109.36 key June support. 108.10 is the May 29 low.
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