The USD has surged against all the major currencies today on the back of robust economic data following yesterdays interest rate rise. US retail sales m/m came in strong at 0.8% (0.4% exp), showcasing that US consumers are enjoying the economic boom as of late. Adding further good news, was initial jobless claims which fell to 218K (223K exp) also showing that the labour market in the US is in good form. So you have positive retail sales, inflation above 2%, interest rate rises and a healthy labour market to top it off - things are looking really good for the US economy going forward. The question will be can this be sustained and not end up in a bubble like climate like we've seen in the past. Right now though the US economy is robust and with the fiscal benefits to be passed through over the coming year expectations are high for the USD and fixed income markets.
One of the big movers today was of course the USDCAD which is always one to watch when it comes to genuine USD moves. We saw a bullish push higher to smash through resistance at 1.3041, but stopping just short of 1.3101. Bullish traders will now be eyeing up that next level of resistance at 1.3232 to see if they really can extend the USD further after months of battling resistance levels. If the bears do swing back into action against the USDCAD then I would expect a bounce at 1.3041 potentially, and if this breaks through then the bears looking to target 1.2881 in this instance. I would caution traders though on the potential bullish trend line which the bulls may look to fight back from in a bearish run, so it's worth paying attention to here.
The Bank of Japan (BoJ) is to have its interest rate announcement some time in the next few hours and the markets are not expecting any change thus far as monetary policy is expected to remain accommodating. One of the key things though will be the statement as the BoJ may lift its inflation forecasts which would be a positive sign for the Japanese economy, especially since it has struggled to maintain positive inflation for some time.
With a robust USD in mind, and the BoJ still trying to apply monetary policy which is accommodating, the USDJPY is still looking bullish in the long run. Resistance can be found at 111.083 and 112.033 with the likelihood of a test on 111.083 in the short term to be quite good odds if the USD continues to dominate. On the bearish side we have support levels at 109.347 and 108.271, but I would be more focused on the bullish trend line which will likely act as dynamic support in these scenarios.
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