In April, factory orders fell at the rate of -0.4% compared to the previous month. This print fell short of forecasts which were around 0.0%, and is a sharp contrast to the 2.2% reading for March.
(click to enlarge; source: forexfactory.com)
We can see that this is the 8th month of declining orders in the past 9 months. Economic data is suppose to star turning up after a slow Q1, at least that’s what the FOMC projects.
However, at the early stage of the game (April and May), we have not seen strong evidence to suport the FOMC’s optimism.
The USD’s strength comes from the projection that the FOMC will raise rates in the September meeting, but if the economic slump persists, the Fed might have to remain accommodative throughout the year.
The concern that that the FOMC was over-optimistic is causing the USD to retreat during the 6/2 session.
We already saw the USD fall against the AUD and the EUR. They got a boost from the RBA statement and Eurozone CPI data respectively. But we can also see the USD/JPY and USD/CAD fall without any important Japanese or Canadian data today.
The USD/JPY rallied to a high on the year at 125.05 before retreating this week. Price is now falling below 124. However, from the 4H chart, we still see a bullish market.
A break below 123.40 would be needed to clear a rising trendline and form a price top.
The daily chart shows that USD/JPY could be completing a bearish outside bar during the 6/2 session.
However, we know tha the prevailing trend has been bullish since at least 2012. Last week, USD/JPY broke above a multi-month consolidation range around 122.
Therefore, the current bearish outlook should be limited to the very short-term and to the 122.00 handle.
The USD/CAD has been bullish but found resistance at 1.2563 to start the week. IT was drifting lower, but accelerated downwards after the US factory orders print.
The dip broke below a rising trendline, below 1.24, and formed a price top. The 4H RSI is also falling below 40, which would reflect loss o the prevailing bullish momentum.
Because of the prevailing uptrend and the divergence of policy stance between the FOMC and he BoJ, we should limit the bearish outlook to the 1.22-1.2250 area.
In the daily chart, we can see that this is a previous resistance pivot. Then, a return above 1.23 should indicate bullish continuation.
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