USDJPY Headed For 8th Straight Win As Strong US Data Provides More Fuel

Summary:

The USDJPY pair was already on the rising gradient, but Thursday's upbeat US economic data has added support to the interest rate momentum.

The US dollar extended its wins against the Japanese yen to the eighth trading session in a row on Thursday. The USDJPY trading pair was up marginally by 0.07% to trade at 151.353 in the New York session, as positive US initial jobless claims and Manufacturing PMI data weighed the yen down.

USDJPY rose by the widest margin in the current trading week (1.14%) on Tuesday following BoJ’s move to raise Japan’s interest rates by 10 basis points. The upside received another boost on Wednesday following the Fed’s decision to retain US interest rates in the 5.25%-5.50% range. This triggered a wider deviation between US Treasury yields and Japan’s government-issued bonds, exerting more downward pressure on the yen. It is also probable that the BoJ could intervene if USDJPY gets to the psychological 152.00 mark, and this could limit buyers’ appetite.

The US dollar received new propulsion from Thursday’s strong US economy figures. First, Initial Jobless Claims fell from 212 K (revised from 209 K) to 210 K in the week ending March 14. The figure was lower than the projected figure of 212 K. In addition, Existing Home sales numbers rose to 4.38 million in February from January’s 4 million, beating the forecast 3.95 million. Furthermore, the Philadelphia Fed Manufacturing Index rose to 3.2, higher than the consensus figure that had projected a decline to -2.6.

Also, US manufacturing activity rose in March, as preliminary S&P Global US Manufacturing PMI came in at 52.5, beating the forecast 51.8. However, the services PMI declined to 51.7 from February’s 52.3, missing the expected reading of 52.0. This saw the composite PMI meet the forecast 52.2. These figures will keep the dollar on the winning side at least until Japan’s February National PMI data comes out later on Thursday.

Technical analysis

The RSI indicator on USDJPY calls for further upside. The pivot mark is at 150.65, and the buyers will be in control if they keep the pair’s exchange rate above that level. If the bullish momentum persists, it will likely break the next resistance at 151.85 and potentially test 152.20 in extension. However, if the sellers manage to bring the pair below 150.65, they could build momentum to go below the support at 150.25. That would also invalidate the upside view, and potentially go as low as 149.80 in extension.