Above is a look at the recent movement of the USDJPY pair in its daily time frame. As you can see, the pair has broken its downtrend line which peaked last April 6, 2009. Notice that two or three months prior to breaking above the downtrend resistance, the pair has already been traversing within an ascending channel. At present, it is exchanging between 91.00 and 89.00. If it clears above 90.00 cleanly, it could easily move up until it encounters some selling pressure at 92.00. A break from this mark could send the pair to 94.00. On the flip side, it could slide towards channel’s support or even at 88.00 if it falls below 89.00. However, since the ascending channel is still intact, the pair has a higher chance of rising at least in the short term.
Fundamentally, the US dollar could get another boost if and when the US’s preliminary first quarter GDP (to be reported tomorrow, May 27, at 12:30 pm GMT) prints some strong figure. This extra push will be on top of the currency’s favor over the other currencies due to ongoing crisis in Europe and in Korea. Anyway, the country’s annual growth rate is projected to be positively revised to 3.5% from the advance estimate of 3.2%. A growth of at least 3.5% could spark some speculation of a Federal rate hike sooner than later, enhancing the demand for the mighty dollar and sending the anti-dollars back into the sidelines again and of course the USDJPY up to the higher ranks.
The question is: Does the data from January to March 2010 support the market’s forecast?
The US’s score of the US’s headline retail sales were at 0.5%, 2.1%, and 0.4%, respectively, from January until March. Note that each actual number beat the market’s consensus. And in case you do not, consumption, which can be gauged using the retail sales account, takes up about a whopping 70% of the US’s overall output. Given the better-than-expected results, the country’s 1Q score could indeed be modified upward.