The U.S. dollar initially rallied against its major trading partners but ended the day unchanged or lower despite a barrage of overall strong US economic data. The February Empire Manufacturing reading of 18.7, was its best reading since September 2014 and a strong beat of the 7.0 analyst forecast. January retail sales also beat both on the monthly and yearly readings. US inflation for January also came in hotter than expected, but wages data fell 0.6% monthly and came in flat year over year.
The US dollar fell against the Japanese yen during Fed Chari Janet Yellen’s second day of testimony. Mrs. Yellen noted, “economic performance has been quite disappointing.” She also reiterated that the economy is weak and defended Fed policies as to helping the economy and not being a hindrance.
The USD/JPY daily chart highlights the key consolidation that has taken place since the end of 2016. Initial resistance remains the 115 level and support lies at the 111.50 level. If price remains weak, key support may come from the 111.00 to 112.50 range. If we do not see another leg lower and bullishness returns and breaks the 115 barrier, the next key resistance level will be the 118.70 level.
The trade: Buy USD/JPY 112.50, with a stop loss at 111.50 and take profit at 115.50. The risk/reward ratio is 1:3