USDJPY Fails at 107.00 so Far

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Market Drivers March 29, 2018
USDJPY can’t pop 107.00 yet
UK GDP in line
Nikkei 0.61% Dax 0.72%
Oil $65/bbl
Gold $1324/oz.
Bitcoin $7400

Europe and Asia:
GBP UK GDP 0.4% vs. 0.4%

North America:
CAD GDP 8:30
USD PI/PS 8:30

Activity in the FX market was slowing noticeably as we approach the end of a holiday-shortened week with little data or newsflow keeping the major pairs in tight lackluster ranges for most of the night.

Both EURUSD and GBPUSD tried to mount mild rebound rallies in Asian session trade, but quickly ran into sellers and traded back to the lower end of the ranges as 1.2300 remains the support for euro and 1.4050 is acting as near-term support for the pound.

In economic news, the UK GDP printed in line at 0.4% as eyed while mortgage approvals slipped 63K vs 66K forecast. Neither report had much impact on trade today. Cable is trying to hold bid ahead of the 1.4000 support level, but in many ways, its near-term direction is likely to be determined by dollar flows rather any specific UK data.

To that end, the US dollar recovery ran into some resistance after a strong move up yesterday in the wake of much better than expected revisions of US GDP data. USDJPY failed around the 107.00 figure and traded all the way down to 106.39 before bouncing once again. Yesterday’s beat on USD GDP numbers was welcome news to dollar bulls, but the market remains skeptical that US growth will accelerate in Q1 of this year. The US consumer is key to the upbeat scenario and so far this year data on spending has been less than impressive.

That’s why today’s US Personal Income/Spending data may be watched with more interest than usual. The market is forecasting no change from the month prior with income expected to rise 0.4% and PCE up slightly to 1.6% from 1.5%. Any upward surprise is almost certain to help dollar sentiment as it would provide tangible proof that US growth is finally translating into income growth and if the number beats it could provide the catalyst for a USDJPY rally through the 107.00 figure. On the other hand, if the number disappoint they could unwind much of the move from yesterday. US yields remain unimpressed with 10 year now at 2.77% level and they could trade below the 2.75% mark dragging USDJPY back towards 106.00 as the day proceeds.

Boris Schlossberg
Managing Director

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