By Fast Brokers – The USD/JPY is extending its intraday gains in reaction to stronger than expected U.S. retail sales data. The increase in U.S. consumption is a positive for the economy and improves the outlook for demand for Japanese made goods. The USD/JPY was already performing well today in reaction to disappointing EU GDP data and another hike in China’s required reserve ratio. The slowdown in the EU economy and tighter liquidity measures from China are both negative developments for the risk trade and resulted in a leg up in the Dollar. The USD/JPY opted to participate since the Dollar is being favored over the Yen due to stronger U.S. economic data, implying the Fed could tighten liquidity before the BoJ. Meanwhile, investors are awaiting Prelim UoM Consumer Sentiment data. The UoM data usually has a considerable impact on the Dollar, meaning the FX markets could remain volatile as the trading week comes to a close. Although U.S. markets will be closed on Monday for a bank holiday, Japan will release its Prelim GDP during Monday’s Asia trading session. Therefore the USD/JPY could be particularly volatile on Monday despite many investors taking the day off. Analysts are expecting Prelim GDP to print at 1.0%, compared to a downward revised 0.3% the last time around.
Technically speaking, we’ve shifted our trend lines to compensate for the USD/JPY’s upward movement over the past 24 hours. There are still multiple downtrend lines we can form to serve as technical barriers. Our 3rd tier could carry some extra weight since it runs through previous February highs. The USD/JPY is currently trading back above its psychological 90 level. However, we’ve seen how influential the 90 trading zone can be, meaning the USD/JPY could have trouble breaking free. As for the downside, the USD/JPY has multiple uptrend lines serving as technical cushions along with 2/3, 2/11, and 2/10 lows.
Present Price: 90.30
Resistances: 90.32, 90.46, 90.70, 90.70, 90.82, 90.94
Supports: 90.15, 89.99, 89.86, 89.72, 89.62., 89.50
Psychological: 90, February highs and lows
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