The US Dollar (USD) extended upside movement against the Japanese Yen (JPY) on Tuesday for the third day in a row, increasing the price of USD/JPY to more than 102.30 ahead of Japan’s Gross Domestic Product (GDP) report which is due later this week. The sentiment remains bullish due to Higher Low (HL) in the recent downward wave. A breakout through the daily triangle formation should provide clear direction to the pair.
Technical Analysis
As of this writing, the pair is being traded at 102.31 in the forex trading market. A hurdle may be noted around 102.36, the 55 Simple Moving Average (SMA) ahead of the trendline resistance as demonstrated in the following chart. A break and daily closing above the trendline could trigger renewed buying interest, opening doors for the fresh highs above the 104.00 handle.
On the downside the pair is likely to find a support near 102.00, the psychological number and 38.2% fib level ahead of the channel support which is currently sitting in near 101.58. A break and daily closing below the channel support might accelerate the selling pressure, validating a dip below the 100.00 milestone.
First Quarter GDP
On Thursday, the Cabinet Office of Japan will release the first quarter GDP report. According to the median projection of various economists, the GDP increased by 1.12% during the first four months of the ongoing year as compared to 0.2% in the quarter before. Similarly, the GDP remained 4.5% during first quarter compared with 0.7% in the same quarter of the year before, the forecast added. Generally speaking, a better than expected GDP reading is considered bearish for USD/JPY and vice versa.
US Inflation
The US Bureau of Statistics will release the Consumer Price Index (CPI) report on Thursday. According to the average forecast of various analysts, the CPI—a main gauge for inflation– improved to 0.3% last month as compared to 0.2% in the month before. Similarly, the CPI increased by 2.0% in April as compared to 1.5% in the same month of the year before, the projection added. In the forex trading market, higher than expected CPI figures are considered bullish for USD/JPY and vice versa.
Industrial Production
The Ministry of Economy, Trade and Industry of Japan is due to release the industrial production report on Friday. According to the forecast of different analysts, the industrial production increased by 0.3% during March as compared to 2.3% decline in the month before, better than expected actual outcome will be seen as bearish for USD/JPY and vice versa.
Trade Ideas
Buying or selling the pair on bullish or bearish breakout through the daily triangle formation appears to be a good strategy; the target should be based on the above mentioned support and resistance levels.
About the Author
Jonathan Millet is an experienced, successful, 12-year veteran of the foreign exchange markets. The combination of his unique insight, technical agility and methodical approach to financial analysis have positioned him as one of the most well respected traders in the industry. He is currently the Chief Analyst at ForexMinute.Com, an up-and-coming financial news portal.
