USD attempting to build headway against JPY
On Tuesday Aug 14 USD staged a break-out above 78.70, which has now become a support level and went on to register a one month high. This move was no doubt on the back of growing evidence of disappointing performance of Japan's economy, which in turn raises the threat of intervention from the Japanese central bank to weaken the currency to boost exports. Meanwhile, good retail sales figures out of the US suggest the economy there may not be so bleak and could see the US Federal Reserve delay carrying out monetary stimulus.
USDJPY could trade higher if weekly unemployment claims, building permits and housing starts, all due out 1:30 PM UK time on Thursday show positive momentum in the US economy. On Friday US preliminary consumer sentiment due 2:55 PM UK time could also provide another catalyst to move the pair. Poor numbers could see USDJPY falling below support at 78.70.
On the upside USDJPY faces resistance around 79.00-79.10, 79.40 and 79.90. Support lines are drawn around 78.70, 78.45-50 and 78.35.
Economic data is currently being interpreted by the markets through the prism of whether or not it will trigger central bank intervention. A rising JPY, possibly on the back of disappointing US data, does raise the prospect of the Bank of Japan intervening to stop it strengthening and could therefore produce very choppy markets.
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