The USD/JPY is converging on its 50-day moving average, which is currently at 110.25. Earlier today, it faded resistance @ 109.64 and two days prior to that, it advanced to as high as 109.55 before pulling back to as low as 108.46. In a previous post, I noted that @ 109.55 was a key intraday resistance level. (See technical analysis chart below.)
Upcoming economic data that might be just enough to nudge the forex pair above resistance at its 50-day moving average is Japan’s GDP report for Q1-2016, which is to be released May-17-2016 @ 7:50PM (ET). Consensus estimates have Japan improving to +0.1% vs. the previous report @ -0.3%. Anything short of this will likely be detrimental to Yen bulls. Besides, a weaker report would only aid its cause for currency intervention or further monetary stimulus when it hosts this month’s upcoming G-7 meeting to be held during May 26-27, 2016.
Also heavily influencing the direction of the Yen will be market interpretations derived from the May 18, 2016 release of minutes from the last FOMC policy meeting, which was held on April 27, 2016 . Traders and investors will be mining the report for new insights on the Fed’s economic outlook and a shift in its bias towards raising rates. On one hand, the Fed likes to highlight the economic strength and resiliency of the U.S. economy, while the other raises a sign of caution and reminds us that it is still chasing the elusive butterfly target of 2% inflation or the risks of weakness spilling over from Asia and Europe. Stay tuned. It’s the longest running drama in fiscal theatre.
Meanwhile, the market condition for the USD/JPY continues to evolve. As mentioned before, its 4-hour time frame indicates a bearish channel, but earlier in overnight trading, it cleared resistance at its 200-bar moving average and this has now become a level of support as the USD/JPY consolidate gains since its bullish reversal off the bottom @ 105.546 on May 2, 2016.