The Japanese economy continues to find itself in the spotlight as of late and for all of the wrong reasons, as Abenomics shows the world that economics ain't that easy and the market can always throw curve balls distorting the reality of things. Case and point is the recent household spending data out of the Japanese economy which has fallen from -2.5% in the previous to month to -4.4%, showing that the despite the need to devalue the Yen the Japanese economy still remains resolute in its efforts to increase household spending. Additionally inflation remains very flat in the economy but this should come as no surprise as energy prices are at record lows in the wake of falling oil prices globally, and for a long period of time Japan relied heavily on oil as it looked to switch of its nuclear sector so the data will also be a tad skewed.
For the USDJPY traders the sky used to be the limit and successive stimulus packages have given the market a strange mindset about bull runs and the need for it in today's market environment. A quick look at the charts though show a telling story as risk adversity has lead to market participants looked to hedge themselves in the safe bet that is the Yen. For now the trend seems to be slightly bullish and it's looking to edge up towards resistance at 119.316. Certainly, the next level above this at 120.204 is likely to be the key level here for any further bullish movements as it looks to be a very strong level in the current market. For me the 50 day moving average is also a key point on the charts as well to focus as this will likely act as dynamic resistance as the market looks to push that little bit harder.
The USD has so far played out quite strongly on the charts in recent times, and the dollar has certainly pushed to retain its status as the king of currencies. Core durable good orders out today showed once against there is still some weakness, as they came in at -1.2%. While pending home sales also slipped slightly to 0.1% (exp 0.8%). For the US bulls this is a little worrying and the FED will certainly take this into account despite the very strong labour market that has been apparent for some time. As despite a strong labour market, you can't sustain it if you have no real growth in the economy.
Looking at the dollar index on the charts we previously had a strong bullish trend line up the charts but that has dropped of strongly in the previous few days as markets look to shift out of the USD into other currencies. For me the breakthrough shows a rejection of the trend line as well which is a very strong bearish signal, so I would be looking for markets to remain somewhat bearish in the near term despite the upbeat nature of the USD in the previous few months. The next level down for support can also be found at 97.833 and is likely to hold up any pressure.
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