Market News & Analysis
USD/JPY higher as Philly Fed and Retail Sales Data is Stronger
Joe Perry January 17, 2020 3:19 AM
The Philadelphia Fed Manufacturing Index for January was released earlier today, and it showed a strong uptick in activity at a reading of 17 vs a reading of 4 expected. This is the strongest reading since May 2019. Current new orders increased 7.1 points and the shipments index rose 7.7 points. The stronger than expected advance in activity may be due to the agreement of the US-China trade deal agreement in December, and it’s expected signing yesterday. In addition, although Retail Sales (MoM) for December was in line was expectations, the Core Retail Sales was 0.7% vs and expectation of 0.3%. Core retail sales excludes the volatile autos component of the data. Along with retailer earnings, this may indicate a strong holiday shopping season.
As a result of the data, today stocks have opened at or near all time highs once again. With the markets in risk on mode, USD/JPY is higher as well. However, one must be weary of how much further USD/JPY can extend on the upside. The weekly chart shows that price has been in a downtrend since mid-2015 and is currently testing the underside of the downward sloping trendline and the 200 Week Moving Average near 110.10.
Source: Tradingview, City Index
A daily chart shows that price stalled near last year’s JPY flash crash low at 104.65 on August 26th, 2019, and has been bouncing towards the trendline since then, forming a rising wedge. 109.40/70 was a strong resistance level on the move higher, and now acts as support. As previously mentioned, USD/JPY is currently testing the long-term trendline, as well as, the upper end of the rising wedge. If resistance holds and the pair breaks back below the rising wedge (it did once, only to bounce back into the wedge), the target for the wedge would be a full retracement back to 104.65. However, price would need to break horizontal support at the 109.40/70 level, the 200 Day Moving Average and horizontal support near 108.60, and recent lows near 107.60. If price manages to break higher above the downward sloping trendline near 110.30, price can run up to the gap at 110.90/111.00. Above there, resistance comes across at the previous highs from late April 2019 near 112.40.
Source: Tradingview, City Index
As we wrote about yesterday when discussing the US-China trade deal signing, the S&P 500 is at critical resistance near the Golden Fib 161.8% retracement level of 3335. This coincides nicely with the resistance in USD/JPY. If stocks manage to push higher, is could bring USD/JPY with it. If it is rejected and stocks move lower, USD/JPY could be on its way back towards the 200 Day Moving Average.
From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.
As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.