Key Highlights

The US Dollar failed to stay above 111.00 and declined sharply against the Japanese Yen.

There is a connecting bullish trend line formed with support at 110.30 on the 4-hours chart of USD/JPY.

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The US Retail Sales in Jan 2019 declined 1.2% (MoM), whereas the forecast was +0.2%.

The US Industrial Production for Jan 2019 will be released today, which could increase 0.1% (MoM).

USDJPY Technical Analysis

The US Dollar started a solid upward move after forming a strong support at 109.60 against the Japanese Yen. The USD/JPY pair rallied above 110.60 and 111.00 before sellers appeared near 111.10.

Looking at the 4-hours chart, the pair gained strength after it broke the 110.00 resistance and a contracting triangle with resistance at 109.95. It opened the doors for more gains above 110.50 and the pair settled well above the 100 (red) simple moving average (4-hours).

The pair even spiked above the 111.00 resistance and traded to a new monthly high at 111.12. However, the recent disappointing retail sales report in the US triggered bearish moves in USD/JPY below the 111.00 level.

The pair started a downside correction and traded below the 50% Fib retracement level of the recent wave from the 109.66 low to 111.12 high. However, there are many supports on the downside near 110.30 and 110.20. There is also a connecting bullish trend line formed with support at 110.30.

The main support is near the 110.10 and 110.00 levels, where buyers are likely to take a stand if the pair continues to move down. On the upside, resistances are near 110.60 and 111.00.

Recently in the US, the Retail Sales report for Jan 2019 was released. The market was looking for a 0.2% rise in sales in Jan 2019, compared with the previous month.

However, the result was very disappointing as there was a sharp 1.2% decline in the Retail Sales. Moreover, the Retail Sales ex Autos declined 1.8%, whereas the market was looking for a 0.1% rise.

The report added that:

Advance estimates of U.S. retail and food services sales for December 2018, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $505.8 billion, a decrease of 1.2 percent (±0.5 percent) from the previous month, but 2.3 percent (±0.5 percent) above December 2017.

Overall, the US Dollar came under pressure after the release, but the USD/JPY pair remains well supported as long as it is trading above the 110.00 pivot level.

Economic Releases to Watch Today

  • UK Retail Sales for Jan 2019 (YoY) – Forecast +3.4%, versus +3.0% previous.
  • UK Retail Sales for Jan 2019 (MoM) – Forecast +0.2%, versus -0.9% previous.
  • US Industrial Production Jan 2019 (MoM) – Forecast 0.1%, versus 0.3% previous.
  • US Capacity Utilization Jan 2019 – Forecast 78.7%, versus 78.7% previous.

 

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