Trade Deficit in focus today

Market continues to trade in tight range in Asia ahead of Trade Balance data from US. May trade deficit is expected to widen to $63.43b to $64.95b, the third largest trade deficit on record, as energy prices remain high and demand for foreign goods stays strong. While, trade deficit has steadied below $60b since reaching a record $66.6b last Oct, there is growing concerns that the capital net flow, which is getting more volatile in recent months, is getting harder to cover the trade deficit.

Based on current sentiment, a better than expected trade deficit could fuel some further dollar recovery but traders could be cautious in pushing dollar much higher ahead of retail sales data and BoJ rate decision later this week. technically speaking, we’d still favor another rise in dollar before finishing the recovery which started after last Friday’s spike low.


Daily Pivots: (S1) 113.89; (P) 114.27; (R1) 114.63

USD/JPY continues to trade with mild upside bias today. At this point, as long as USD/JPY stays above 114.07 minor support, bias remains on the upside for short term trend line resistance (now at 114.95). Below 114.07 will indicate the rebound from 113.39 has likely finished and risk retest of this low.

As discussed before, mild bullish convergence in 4 hours RSI and MACD suggests a low is formed at 113.39 already and intraday bias is turned back to the upside. A break above mentioned trend line will confirm that corrective fall from 116.69 has completed and bring retest of 116.69 high. Also, it will add much credence to our sideway trading view.

However, regardless of different interpretation, a firm break below 113.19/37 cluster support will indicate a deeper decline is underway which could push USD/JPY further lower towards 61.8% retracement of 108.99 to 116.69 at 111.93 or lower.

In a bigger picture, USD/JPY’s rebound from 108.99 has completed at 116.69, after failing to break firmly above fibo resistance of 116.65 (61.8% retracement of 121.38 to 108.99). Subsequent fall with daily MACD turned below signal line confirms a short term top is formed at 116.69 already and consolidation has started. However, we would not be too bearish on USD/JPY yet. The strength and time of the rebound form 108.99 is suggesting that the whole fall from 121.38 have completed with 3 waves down to 108.99 and further rally is still in favor to follow towards 118.88 resistance. As long as USD/JPY’s retreat from 116.69 is contained by this 113.19/37 cluster support, we’ll prefer to treat the price action from 116.69 as sideway consolidation only, that means, further rally is still expected later after finishing the consolidation and bring a break above 116.69 cluster resistance to 118.88 level.

USD/JPY Hourly Chart - Forex Newsletters, Forex Outlook, Forex Review, Forex Signal

Read full report (EUR/USD, GBP/USD, USD/CHF, USD/JPY) here.

Shing-Ip Tsui (Shing) is the founder and CEO of ActionForex is set up with the aim to empower individual forex traders by providing insightful contents. Analysis reports, live pivot points on majors and crosses, etc are provided with collection of carefully selected educational articles and free trading ebook downloads.