USD/JPY – Bears Remain in Charge after Disappointing US Data

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USD/JPY - Bears Remain in Charge after Disappointing US Data

Today, the USD was affected by disappointing preliminary UMICH consumer sentiment data. The greenback has been shaky since at least April, because economic data has not supported the projections by the FOMC. This means, the plan to raise rates by September is still in question.

Preliminary UMICH Conusmer Sentiment (May): 88.6
Forecast: 95.8
Previous: 95.9
umich consumer sentiment
(click to enlarge; source: forexfactory.com)

it appears that sentiment data has peaked in January and the soft Q1 data has caught up. When this data set was improving at the end of 2014, weak data was brushed off because it seemed like underlying demand was there. Now, if sentiment data declines along with economic data, the FOMC will really have to reconsider its rate hike time-line.

We also had other weak US data today. The Empire State Manufacturing reading for May came in at 3.1, which improved from the -1.2 print in April, but missed the forecast around 5.1. Industrial production was remained at -0.3% in April, which matched the March reading, and missed the forecast around 0.1%. The Capacity Utilization Rate shrank to 78.2% in April from 78.6% in March, missing forecast of a reading around 78.4%.

The soft data points today pressured the USD across the board. The USD/JPY fore example, is staying  in a bearish market.

USD/JPY 4H Chart 5/15
usdjpy 4h chart 5/15
(click to enlarge)

THe 4H chart shows a market that has been mainly trading sideways. Within this consolidation, the USD/JPY started to retreat from 120.50 last week, and has been in a choppy but slightly bearish mode. Th RSI tagged 30 this week, and is staying below 60 after today’s reaction. This adds to the bearish bias and puts pressure towards the 118.50 pivot down to the 118.30 area.

USD/JPY Daily Chart 5/15
usdjpy daily chart 5/15
(click to enlarge)

The 118.30-118.50 area will be a key consolidation support. It is also the central pivot of a larger, multi-month consolidation range. A hold above 118.30 still maintains a bullish bias in the medium-term. A break below it will open up the 115.56-116.00 support. Only a break below 115.50 would open up a bearish outlook for the medium-term. Otherwise the medium-term outlook would still be neutral to neutral-bullish.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.