Chinese Data Pushes USD/JPY Through 106.00

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Market Drivers July 15, 2016

USD/JPY takes out 106.00
CNY data beats
Nikkei 0.68% Dax -0.46%
Oil $45/bbl
Gold $1332/oz.

Europe and Asia:
CNY GDP 6.7% vs. 6.6%
CNY IP 6.0% vs. 5.9%
CNY Retail Sales 10.6% vs 9.8%
CNY Yuan Loans 1380B vs. 990B

North America:
USD Retail Sales 8:30
USD CPI 8:30
USD Empire 8:30

Better Chinese data helped fuel a move in USD/JPY today extending the rally through the 106.00 level as the pair put in one of its best one week performances in 17 years.

The beats in Chinese GDP, Retail Sales and Industrial Production all helped to stoke a major move in Asian session trade that topped out at the 106.30 level before running into some profit taking. Chinese GDP rose 6.7% versus 6.6% IP climbed to 6.0% from 5.9% and Retail Sales soared back above double digits to 10.6% from 9.8% projected.

Although the news was a clear relief to the market that was concerned about Chinese growth, critics pointed out that much of the improvement was driven through expansion of credit as new Yuan loans exploded to 1308B from 990B forecast. Thi is indeed a troubling sign for the future, but for now it assuages fears that China was slowly tipping into contraction and helped support the moves in all the risk pairs with Aussie rising to 7670 as it now eyes the key 7700 level.

With USD/JPY having now made it back to pre-Brexit levels further upside may be harder going as the pair could see much more serious resistance near the 107.00 figure. Meanwhile today’s US Retail Sales data will be the key economic release of the day. The market is looking for a steep drop to 0.1% from 0.5% which will likely cap the move at these levels. However, if the numbers surprise to the upside USD/JPY could plow forward and test the 106.50 level as the day proceeds.

Boris Schlossberg
Managing Director

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