Weak Japanese economic data encouraged the shedding of risk overnight driving the U.S. Dollar higher against most major currencies while pressuring the Dollar/Yen.
Overnight it was reported that Japanese economic data was weak, with the core CPI falling 1% from a year earlier in June. May industrial production and employment figures also signaled a weakening economy.
The news out of Japan triggered a sharp rise in the Dollar versus most of the major markets. Nervousness ahead of the U.S. GDP number this morning may have contributed to the weakness. Investors are looking for the U.S. to report GDP growth at 2.5% to 2.7%. The Dollar is expected to strengthen if the report comes out worse than expected. The size of the move will be determined by how much the actual report misses the estimates.
Technically, the USD JPY reversed course following the news, sending this pair to a new low for the year. Downside momentum suggests this market is on pace to test the November 2009 bottom at 84.83. A new main top at 88.11 was formed on the daily chart. The trend will remain down until this price is penetrated.
