Look ahead 28/12/23: Japan retail sales and US jobless claims
Data in Japan may light a fire under the long JPY trade if it stokes the belief that the BoJ is just waiting for the right data the show that the years of easy monetary policy is indeed coming to an end, says Jeremy Naylor.
(Partial Video Transcript)
USD-JPY trade worth watching
Welcome, let's take a look now at some of the events for us traders to watch out for on Thursday 28 December, thanks to the fact that this is a foreshortened week and it's likely to be light in volumes right the way throughout the week.
But, there are some interesting data points to watch out for and one of them occurs on Thursday morning. We've been looking a lot at what's happening with the USD/JPY trade, the industrial production numbers and retail sales figures are out early on in the session.
For this I think it's worth looking at what's happening with this dollar-yen chart, now that's a weekly but if you look at the daily chart, we have got this line of support down here, technically an interesting level to watch out for, it's 140.57.
This is a 76.4% retracement, which is this line here that is the big support area and with support between 140.57 and the 14.276 which is the 61.8% retracement that was broken in the last couple of weeks or so.
Certainly, the direction of travel is on the way down. I'm waiting for a break of the 140.57: this will be the dollar weaker against the Japanese yen. Fundamentally there are a couple of things that could happen, which may give us some interesting potential sorting of the dollar-yen trade over the next few weeks and couple of months.
New data could deliver insight on Japanese economy
The industrial production numbers out overnight and retail sales could give us a clearer indication as to the strength or otherwise of the Japanese economy.
If we see these strong numbers begin to pick up with these low interest rates, this low monetary policy environment that we've got, then I think that the central bank under Mr Ueda could well then seriously start looking at ways of mitigating that monetary policy easing start that it's had and start to tighten which would see this track lower.
Ultimately, I think the 137.05, the lows that we had here back in the UK was actually a little bit higher than that at 137.24, which was the lows that we had for the dollar against the yen back on 14 July is ultimately the price target, but I wouldn't want to take a short position until we get a candle closed below the 140.72, 76.4% retracement.
Let's look as well at what's happening in the US, on the US side of that dollar-yen trade we'll be following what's happening with the dollar and the dollar is under pressure, broadly speaking.
Recently, we got some economic data out on Thursday at 1.30pm UK time, which will follow up on beat the street.
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