Last week, the US Conference Board released its widely followed Leading Economic Index, a composite of indicators that hint at future growth. The index printed 0.7% in May, exceeding expectations by 30 basis points (bps). The data is surprisingly positive considering that US gross domestic product (GDP) contracted 0.7% in the first quarter of 2015. Economists are now approximating second-quarter growth at an annualized 2.5%.
The Bank of Japan (BoJ) maintained its considerable stimulus program and its optimistic assessment of the economy last week, signalling its conviction that growth will strengthen enough to push inflation to its 2% target without more monetary easing. Japan’s economy has emerged from last year’s recession as consumers recovered from the pain from a sales tax hike and capital expenditure grew. In the first quarter of 2015, Japan’s economy grew 1.0%, or 3.9% on an annualized basis.
The USDJPY rose 1.79% since the start of the Year and is in bullish phase. The currency tried to rallied last week but found enough selling pressure to give all its gains back and closed in the red, creating an inside week and closed near the low of the week. The stochastic is showing bearish momentum but is still above the 50 mid line.
Expecting an upward move to the rising triangle target projected at 127.84 on a break above previous week high at 124.44 (scenario 1) or a bounce from a weekly support at 121.84 could give the currency enough momentum to reach the rising triangle target projected at 127.84.