USDJPY Shrugs Off Slight Miss in Durable Goods Orders 124 50 Key

The US dollar has been particularly in vogue today. The buck’s rally has been helped along by rising US bond yields and concerns about Greece’s impending debt deadline, and as we go to press, even today’s slight miss in Durable Goods Orders has failed to put the brakes on the dollar’s near-term rally.

The May Durable Goods Orders report, which tracks the purchases of goods that are expected to last at least three years, showed a -1.8% decline in durable goods purchases in May, below the -0.6% drop expected. Adding insult to injury, the April report was also revised down to show a -1.0% drop in durable goods orders. In contrast to the headline report, the “core” report, which filters out large transportation purchases, showed a roughly as-expected 0.5% rise in durable goods purchases in May. The slight miss in durable goods orders suggests that US consumers and businesses remain somewhat cautious about the prospects for the US economy moving forward, though we’re hesitant to read too much into this notoriously volatile report.

Technical View: USDJPY

As we noted above, dollar bulls seemingly couldn’t care less about today’s durable goods orders. After a short-lived dip, the greenback is rallying to new weekly highs across the board, and one of the strongest rallies is taking place in USDJPY. After starting the week near previous support at 122.50, USDJPY has rallied all the way up to 124.00 as we go to press. More to the point, the pair may be forming a double bottom pattern at 122.50, with a break above 124.50 still needed to confirm the breakout. Though the pattern has not yet been confirmed, the MACD’s bullish divergence at the recent lows and move back above the “0” level support the bullish view.

From here, the aforementioned 124.50 will be the next critical hurdle to watch. If bulls are able to break through that barrier, a move back to the nearly 15-year high just below 126.00 is possible heading into July. Alternatively, if the bears are able to defend 124.50, further consolidation in the recent 200-pip range is likely, especially given the BOJ and Japanese government’s growing discomfort with the yen’s extreme weakness.