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On Monday, the Japanese Yen pared the gains versus its US dollar counterpart. Initially, in early Asian trade, the currency rose because disappointing economic news from China made investors rush into the safe-haven currency. Over the weekend, some Chinese data was released, which raised worries in the market about slow global growth. In particular, factory production and retail sales all advanced less than expected, reinforcing the fact that March’s recovery was not yet stable.
The yen then retreated from its earlier highs as Tokyo shares regained strength from strong U.S. data on Friday that helped offset concerns over weak Chinese economic indicators.
According to Commerce Department figures, US purchases witnessed a 1.3% rise in April, the biggest gain since March 2013, after a 0.3 percent drop in March. Core retail sales were seen climbing 0.1% in March, while analysts had expected retail sales to gain 0.8% and core retail sales to add 0.1% last month.
The data hit the record high as Americans increased purchases of automobiles and a wide range of other goods, indicating that economic growth was on track to recover after the first quarter of sluggishness. The positive retail sales data helped reinforce investors’ expectations that the Fed will raise interest rates further this year. However, the data is probably not enough for the US central bank to initiate a rate hike right next month as inflation remains tame.
Fig. USDJPY D1 Technical Chart
USDJPY has bounced slightly from the support level at around 105.522 to as high as 108.880. The pair has been in a strongly bearish market since the red arrow appeared above the price. RSI is hovering at level 48 and pointing towards the overbought zone, signaling that the ground for an up-move is being formed. With the pressure of the red parabolics sar above, the price is expected to hit the resistance area at 110.564 before dropping back.
Buy Digital Call Option at 108.842 valid until May 20, 2016
Buy Digital Put Option at 110.564 valid until May 20, 2016