Today we had inflation, jobless claims, and manufacturing data from the US. Let’s take a look at these data points and assess the USD/JPY’s technical development, which seems to be showing support.
US PPI m/m (Dec.): -0.3%
Core PPI m/m (Dec): 0.3%
Inflation at the factory gate was negative, falling by the most in 3 years. This was mainly due to the decline in energy prices. The core reading showed a 0.3% increase.
Jobless Claims: 316K
Previous week: 297K
Jobless claims climbed above 300K for the first time since Nov. 2014, and before that it didn’t happen since Sept. The reading is disappointing, but if we look at the trend, jobless claims have been trending down since the financial crisis.
Empire State Manufacturing Index (Jan.): 10.0
Philly Fed Manufacturing Index (Jan.): 6.3
Manufacturing growth improved in the NY region, but decelerated in the Philly region. In general manufacturing data have been mixed in the past few months, but at the end of the day, manufacturing has been expanding.
US Overbought? Today’s data was mixed. It does lean towards the general sense this week that the USD may be overbought. The poor retail sales data yesterday also adds to this concept. So what does that mean for the USD/JPY?
USD/JPY Already in Consolidation: Well, the USD/JPY has already been consolidating since making a 2014-high in early December at 121.70. After than, price has corrected to 115.56. Then a failed rally that stalled at 120.82 ended with the current bearish correction leg is it testing the 116.00 handle.
When we look closer at the price action we can see that price appears to be trying to stay above 116.00, and if it does, USD/JPY might be gearing up for a bullish continuation.
Still Bearish: Now, USD/JPY’s 4H chart is still bearish, with lower highs and lower lows. The latest failure to break above 118 is another bearish sign. The bearish candle that followed suggests bears are in charge, with the 115.56 low in sight.
Bullish Scenario: Now, after today’s US data release, the pair appears to be trying to stay above 116 as well as yesterday’s support pivot. Now, if it does make a higher low and pushes back above 118, we can start considering the bullish continuation outlook.
We would also like to see a break above 119 and a falling speedline from the beginning of the year.
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