Article by ForexTime

The USD/JPY surged higher on the back of a stronger than expected 3^rdquarter GDP report.  Positive momentum gained traction, as the technicals now point to a higher greenback.  Forward looking factory orders where somewhat disappointing, although business investment came in better than expected, which should help generate a robust Q4 GDP data point.

U.S. Q3 GDP growth was revised upward to 5.0% from 3.9% in the prior release and 3.5% in the Advance report. Growth was 4.6% in Q2. It’s the strongest back-to-back quarterly gain in 10 years. This robust number pushed U.S. interest rates higher driving up the greenback.

Upward revisions to the GDP were widespread. Consumption was bumped up to 3.2% from 2.2% previously with improvement in both goods and services. Fixed investment was boosted to 7.7% from 6.2%, with nonresidential investment at an 8.9% rate from 7.1%, and residential at 3.2% from 2.7%. Government spending rose at a 4.4% rate after a 4.2% clip. Inventories subtracted a smaller than expected $2.6 billion versus -$5.7 billion previously. Net exports contributed $29.0 billion versus $29.4 billion previously. The GDP chain price index was steady at 1.4%, though the core rate slowed to 1.3% compared to 1.4%.

On the flip side, U.S. durable goods orders fell 0.7% in November from a revised 0.3% October gain. Transportation orders, a major source of volatility since July, fell 1.2% following a 3.3% rebound previously. Excluding transportation, orders dipped 0.4% from -1.0%. Nondefense capital goods orders excluding aircraft were flat after two months of declines. Shipments slid 0.4% in November and the 0.1% October gain was nudged to -0.1%. Nondefense capital goods shipments excluding aircraft rose 0.2%. Inventories edged up 0.4%. The inventory-shipment ratio increased to 1.66 from 1.65.

Support on the currency pair is seen in the 10-day moving average near 118.80, while resistance is seen near the recent highs at 121.70.  Momentum has turned positive as the MACD (moving average convergence divergence) index generated a buy signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread.  The index moved from negative to positive territory confirming the buy signal.

Article by ForexTime

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