USD/JPY Takes a Step Back after Poor Retail Sales Data

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USD/JPY Takes a Step Back after Poor Retail Sales Data

After a dip to 101.50 last week, USD/JPY has quickly popped back above 102, and has been drifting higher this week. During the 8/13 European session, the pair held at 102.50. Then as the US session began, it fell back to about 102.25 after the release of disappointing US retail sales data for July.

US Retail Sales m/m (July): 0.0%, Forecast: 0.2%, Previous 0.2%
US Core Retail Sales m/m (July): 0.1%, Forecast 0.4%, Previous 0.4% Retial sales July US

(source: Census Bureau)

After showing growth in June, retail sales data showed flat demand in July. Amid a period of strong jobs growth, a lack of demand growth reflects a lack of wage growth that would otherwise have stoked more purchases. While this is only one data point for July, it does question whether the pace of recovery in Q2 will translate into Q3. If it doesn’t the FOMC will probably maintain the mid-2015 timeline for its rate hike. If Q3 demand picks up by September, then, there might be a chance of moving the rate hike earlier.

Let’s go back to the USDJPY reaction:

USD/JPY 1H Chart 8/13
usdjpy 1h chart 8/13
(click to enlarge)

The USD/JPY took a step back after the poor retail sales data, but still maintained a bullish bias in the 1H chart where price is holding above the cluster of 200-, 100-, and 50-hour simple moving averages.

The 1H RSI has tagged 70 and has held above 40, showing maintenance of the bullish momentum established when USD/JPY popped up from 101.50 to above 102 last week.

The bullish bias paves a path for USD/JPY to test that 103 area which has been resistance since May. When looking at the daily chart, you can see some more signs that the market could be turning bullish:

USD/JPY Daily Chart 8/13
usdjpy 8/13 dail ychart

(click to enlarge)

1) Price has popped up above the cluster of 200-day, 100-day, and 50-day SMAs. Although price dipped to 101.50, and broke below the SMAs last week, the quick bounce shows that bullish outlook is still maintained.
2) Since the break above a falling triangle trendline, the RSI has popped above 70, and is now holding above 40, so the bullish momentum from the breakout is still maintained.

Given the bullish bias in the 1H chart and the daily chart, we should indeed anticipate a bullish attempt in the short-term to at least challenge the 103 resistance. Above that, we should look at the 103.75-104 highs from March-April as the next resistance.

To contact the reporter of this story, email Fan Yang at fan@forexminute.com
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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.