The USD/JPY has been bullish in March, but stalled at 122 this week, after breaking the 121.70, 2014-high. The 1H chart below shows the pair in an ABC correction. Then, after tagging 120.65, around an earlier near-term consolidation support, price rebounded.
From a fundamental standpoint, the bounce off that support coincided with the release of US data.
Retail Sales m/m (Feb) -0.6%
Core Retail Sales m/m (Feb): -0.1%
Jobless Claims (weekly): 289K
The retail sales data was disappointing in a couple ways. First of all it missed forecasts of a rebound to positive reading. Even worse is that fact that this marks 3 straight months of negative prints for both the headline and core data. This is becoming a worrisome sign, so let’s make sure we pump the breaks a little bit on USD-strength, even though the prevailing bullish momentum can still push it further especially against the JPY. The jobless claims data was impressive, but this it should not really have that much an impact as the FOMC is going to be more focused on wage growth than simply employment numbers.
The fact the traders bought the USD/JPY after the disappointing retail sales data tells us the bullish momentum is still in play, but as I mentioned above, don’t get too excited.
A break above 121.50 could open up the 122.00 handle with risk of pushing higher, but around 124-124.16, we should anticipate resistance because it is the 2007-high as we can see in the monthly chart.
The monthly chart shows price waving hello that 2007-high. Note that the RSI is in overbought territory. While there has been a secular bull run since 2011/2012, the USD/JPY was bearish from 2007-2011. The moving averages reflect a non-bearish mode, and that adds weight to the 124-124.16 area as resistance.
So, let’s maintain a bullish outlook for now, but be prepared for some medium-term consolidation once price approaches the 2007-high.
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