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USD/JPY Forecast 14/06/2013

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USD/JPY Chart
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USD stages a benign rebound after Retail Sales data for May

Yesterday’s US trading session provided fresh triggers for US Dollar bulls as U.S. retail sales were reported higher than expected in May and initial jobless claims marked a substantial decline from the previous week.

Retail sales increased 0.6% after a revised reading for the month of April which saw a positive revision to a net 0.1% gain.

Yesterday’s US trading session provided fresh triggers for US Dollar bulls as U.S. retail sales were reported higher than expected in May and initial jobless claims marked a substantial decline from the previous week. There are now increasing signs of economic resilience in the face of fiscal tightening coming out of Congress. Thursday’s data underscored rising home values and stability in job creation which boosted consumer confidence to multi year highs in the month of May. Rapid gains in consumer spending should lead to a self-reinforcing spiral of employers keep hiring.

Retail sales increased 0.6% after a revised reading for the month of April which saw a positive revision to a net 0.1% gain. A poll conducted by Reuters suggested that economists were expecting a much more moderate rise of 0.4%. In a different report by the Labor Department initial jobless claims for state unemployment benefits dropped by 12,000 to a seasonally adjusted 334,000 last week.

This resulted in a rebound in the USD/JPY pair from levels around 94 to highs market in Early Sydney session at around 95.70-80. As the Asian session started, JPY buying kicked in again dropping the pair lower to below 94.50, only to observe a subsequent cool off in volatility and a moderate bid into the European session to levels around 95, where the pair is currently trading.

Meanwhile Japan's cabinet has approved a set of measures on Friday to boost economic growth. The problem with it is that so far it has failed to impress markets and made Prime Minister Shinzo Abe promise to take additional steps once next month’s elections for the upper house of the Diet (the Japanese Parliament) have concluded.

Binary options traders should be aware that economic growth strategy is the main theme behind Abe's economic revival plan. Very loose monetary policy and a big bout of fiscal spending have been unveiled step by step over the last couple of months to the tepid response by investor community and commentators alike.

The proposed pro-growth measures constitute creation of special economic zones, incentives to boost private investment and heightened participation of women in the labor force. As Abe is very anxious to regain momentum he has promised to deliver a second batch of reforms once parliament reconvenes after the July 21st upper house election.

Looking at the chart the pair could try another test of the strong area of interest around 95.70-80 area, however we would be cautious on any approaches there and would sell strength from 95.80-96.00 entering put trades on an hourly basis. Supports include 94.45-50 and 93.80-94 areas where further below we would see another round of stops which if triggered, can result in yet another couple of figures move to the downside.

Disclaimer: The article is written for informative purposes only and it is not financial advice. The author does not have any position in the currency pairs mentioned, and no plans to initiate a position. He wrote the article himself and expressed his own opinions. He has no business nor personal relationships with any mentioned government entities or stocks. Readers should not treat any opinion expressed by the author as a specific inducement to make a particular trade or follow a particular strategy, but only as an expression of his opinion.

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