Investors are treading lightly in the forex today. In the wake of the historic U.S./North Korea summit and ahead of Wednesday’s FED meeting, the action on the markets has been slow. However, the USD/JPY is showing signs of life. The release of several U.S. economic metrics has boosted sentiment toward the Greenback — we will see if the optimism lasts.
Economic Metrics
In the U.S. pre-market hours, there were several pieces of economic data released to the public. Here is a quick look at the hard numbers:
Event Actual Projections
NFIB Business Optimism Index (May) 107.8 105.2
CPI(YoY, May) 2.8% 2.7%
CPI, Core (May) 256.889 256.897
CPI Ex Food and Energy (YoY, May) 2.2% 2.2%
All in all, the CPI data came in right on schedule. The numbers allude to growing inflation in the United States. This is a welcomed sight to the FED, whom have publicly stated inflation is currently above their 2.0% benchmark. Today’s CPI data supports the coming FED rate hikes and policy of quantitative tightening for the intermediate-term.
USD/JPY Technicals
With North Korean hostilities taking a backseat to a more peaceful dialogue, the Japanese yen has slipped against the USD. Even though recent developments out of the U.S./North Korea summit are positive for Japan in the long-term, traders are taking a skeptical view of the yen in the short run.
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Here are the levels to watch for the remainder of the session:
- Resistance(1): 78% Fibonacci Retracement, 110.67
- Support(1): Daily SMA, 109.89
- Support(2): Bollinger MP, 109.79
Bottom Line: After an early session bullish breakout, the USD/JPY has given back some of its gains. If we see a further retracement, a long scalping plan from 109.92 is a good way to rack a few pips before the daily close. Using a modest profit target of 8-12 pips and 1:1 risk vs reward management plan, this is an inexpensive way to trade the action ahead of the coming FED announcements.
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