Despite talks of USD weakness, the Greenback continued to wreck havoc to other major currencies. First off, the Yen continues to be on the receiving end especially after the Fed didn’t bulk in to weaker inflation data before the FOMC meeting and proceeded to hike fund rates for the third time in 6 months. Well, this was totally unexpected and the follow through especially by BoJ that it was not even thinking of reducing stimulus fuelled the USD bulls and brought things to kind of an equilibrium as the week closed on Friday. However, early in the Asian session, the weak Trade deficit which plunged in lower than expected helped the USD claw back from the recent lows. Even though historically Japanese May trade deficits are usually worse when compared to April’s. When analyzed, exports were stronger jumping from 7.49% to 14.9% boosted by improved auto and flat screen sales to the US and China. Imports on the other hand surged 18% YoY from 15.1% recorded in April mainly because of the pricey oil.
To the charts now and just like the USDZAR, I will continue adding USD longs. Technically, price action continues to trend higher after that correction from under-valuation in April by gapping higher and setting the current round of USD bulls. As you can see, price action is sensitive to the psychological 110.00 price level and every time price action hits it, USD bulls jump in. Just observe the last two pin bars. Right now though, there is a follow up from last week’s pin bar and a buy signal has been printed by the stochastics and there is a high likelihood that this week might close as a bullish bar and confirm the 3 bar reversal formation. If there is a strong break above the resistance trend line, then target 115.00 with ideal targets at 120.00.
Trade as follows:
Stop Loss: 110.50
Take profit: 114.00
Have a good trading day.