USDJPY Heads Higher As BoJ Intervention Looms

Summary:
• Traders have ignored the weak US economic data released on Thursday to send USDJPY higher into the BoJ intervention territory.

The US dollar strengthened further on Thursday, as the USDJPY gained 0.4 percent to trade at 158.72 in the New York session. The pair is well into the BoJ intervention territory and has risen in each of the last five consecutive sessions. The US dollar has gained against the yen on a day when the US economy reported soft economic data once more.

The Initial Jobless Claims figures came in at 238,000, declining from the previous week’s 242,000 but exceeding the forecast target of 235,000. This is another warning sign for the US economy, as it marks the fourth consecutive time the figure has exceeded the forecast figures. It adds to the distress caused by the lower-than–expected May Retail Sales figures released on Tuesday, but the dollar is likely to hold steady.

The Bank of Japan last intervened on May 2, and traders are likely to stay in bullish positions for the USDJPY pair as they wait for potential intervention measures. The fact that the US dollar is rising against the yen is quite peculiar, considering that all the key economic statistic released on Thursday were against the US dollar.

Besides the weak Initial Jobless Claims figures, the May building permits figures also disappointed, coming in at 1.385 million against a forecast of 1.450 million, with a monthly decline of minus 3.8 percent. In addition, Housing Starts shrunk to minus 5.5 percent, far below the forecast growth of 0.7 percent. Furthermore, the Philadelphia Fed Manufacturing Index fell to 1.3 in June from May’s 4.5, missing the forecast figure of 4.8 percent.

Technical analysis

The momentum on USDJPY favours the buyers, and the upside will likely continue if the exchange rate stays above the 158.20 pivot mark. However, the upside will likely meet the first resistance at 158.75, beyond which the next barrier will likely be at 159.00. On the downside, the sellers will likely take control, if the USDJPY exchange rate crosses below 158.10. That could see the first support established at 158.00. Extended control by the sellers at that point will break the support, and invalidate the upside narrative. Also, it could be seen that the pair move lower to test 157.85.