The US dollar is holding firm as disappointing US retail sales, which showed that the 0.4% growth achieved in April missed the market’s expectations of 0.8% growth, and the hawkish remarks from several members of the Fed helped in trimming bets on an imminent rate cut by the Fed.
The strengthening greenback helped the USDJPY currency pair, known as the Gopher, close the 4th trading session in the green on Tuesday. The Japanese GDP growth figures for the first quarter, which showed that the economy grew by 1.6% against the expectations of 0.7%, failed to give support to the Gopher, which has risen over 0.4% during the Wednesday trading session.
Technical
The 4H shows that the bears were able to pull back the price action to within the ascending channel following the bulls’ failure to break above the 137.794 resistance level. However, the bulls have subsequently regained control and have firmly launched an attack against the upper trendline of the channel, a level of interest for the market. A breakthrough above the upper trendline could boost the bulls’ charge to retest the 137.794 resistance level. The fall of the 137.794 resistance level would bring the 138.482 resistance level into play.
However, faltering at the upper trendline could initiate a pullback lower, with the 23.60% Fibonacci retracement level offering significant support. A breakthrough below the Fibonacci retracement level would leave the 135.376 and the lower trendline of the channel at the bears’ mercy.
Summary
The lack of economic data from either economy ahead of Japan’s Inflation Data and Fed Chair Jerome Powell’s address due on Friday, the market chatter could continue to drive the pair in the short term. Should the current bullish sentiment persist, the market could look for an opportunity above the upper trendline of the channel. However, failure to sustain a break above the channel would leave the potential for a massive pullback towards significant levels lower firmly in play.
Sources: TradingView, Reuters, CNBC.
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