USD/JPY: Retail sales the latest setback for buck bulls
City Index September 15, 2015 7:05 PM
<p>Yesterday’s US session bounce seems like a distant memory by now for USD/JPY traders. Overnight, the Bank of Japan left monetary policy unchanged, though the […]</p>
Yesterday’s US session bounce seems like a distant memory by now for USD/JPY traders. Overnight, the Bank of Japan left monetary policy unchanged, though the bank did downgrade its outlook for exports on the back of slower global economic growth. As my colleague Chris Tedder noted, however, “It seems the market was looking for an even more dovish statement and it’s not taking today’s subtle change in the view of the international economy that the bank will introduce more stimulus in the near-term.”
On the other side of the currency pair, the US dollar just suffered another setback in the form of the August retail sales report. Retail Sales rose just 0.2% last month, missing expectations of a 0.3% rise, and the “core” retail sales figure, which filters out volatile automobile purchases, also missed expectations at just 0.1% m/m vs. 0.2% anticipated. It is worth noting that the July retail sales report was revised up by 0.1% to 0.7% m/m, so the data wasn’t uniformly bad, but it is still far from showing a robust US consumer as the Fed heads into its critical monetary policy decision on Thursday.
Technical View: USD/JPY
As we noted above, yesterday’s half-hearted rally in USD/JPY quickly reversed in today’s Asian session, taking the unit to a fresh one-week low and critically, breaking below the rising trend line off the late August low. Today’s breakdown in USD/JPY was foreshadowed by a break in the corresponding bullish trend line on the 4-hour RSI indicator, strengthening bears conviction.
With rates below both this trend line and the key psychological level at 120.00, more downside is possible ahead of the Federal Reserve’s statement. The next meaningful level of short-term support comes in at the confluence of the 50% Fibonacci retracement and previous lows in the 118.80-119.00 zone, where buyers could emerge to support the unit later this week. Meanwhile, only a break back above the 120.00 level would shift the near-term bias back to neutral heading into Thursday’s marquee meeting.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.