The USDJPY staged a recovery after an upbeat University of Michigan’s Consumer Sentiment index reading today. The UoM Consumer Sentiment index registered at 78.9, which was better than the market consensus of 75.0 and also higher than the previous figure of 72.3.
Details of the report show improvement in both the Index of Consumer expectations (from 65.9 to 73.1) and Current Economic Conditions (82.3 to 87.8) components of the index. Today’s data represents the 2nd consecutive monthly gain for this economic metric, showing that consumers in the US are positive about the recovery of the US economy following the easing of lockdowns and reopening of the economy.
After getting hammered all through the week, the US Dollar seems to have obtained some reprieve from the upbeat consumer sentiment report. The greenback had already shown some strength earlier in the day; the news release reinforced this. As a result, the pair found support at the 106.659 price level, where previous lows were formed by the weekly candles of 30 September 2019 and 7 October 2019.
This support bounce has enabled the pair to breeze beyond 107.035 as at today. If this support bounce holds, the price may be able to find some strength to push towards the 107.824 resistance target, consequent upon risky sentiment returning to the markets. 108.263 and 108.423 remain possible resistance targets if price advance is maintained.
Conversely, a return to risk-off sentiment could drive demand for the Yen, which could force the pair down in a move that retests the 107.035 and 106.659 price areas. A breakdown of the lower of these two price levels opens the door for the price to aim for the lower border of the enormous symmetrical triangle that encases the price action from October 2016 till date. Only a breakdown of this triangle will allow the pair aim for 104.981 and 102.381 in the medium-term.