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.
(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:
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:
(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.
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