Weak Japanese Economic Data encourages Shedding of Risk

Weak Japanese economic data encouraged the shedding of riskovernight driving the U.S. Dollar higher against most major currencies whilepressuring the Dollar/Yen. Weak Japanese economic data encouraged the shedding of riskovernight driving the U.S. Dollar higher against most major currencies whilepressuring the Dollar/Yen.

Overnight it was reported that Japanese economic data wasweak, with the core CPI falling 1% from a year earlier in June. May industrialproduction and employment figures also signaled a weakening economy.

The news out of Japan triggered a sharp rise in theDollar versus most of the major markets. Nervousness ahead of the U.S. GDPnumber this morning may have contributed to the weakness. Investors are lookingfor the U.S.to report GDP growth at 2.5% to 2.7%. The Dollar is expected to strengthen ifthe report comes out worse than expected. The size of the move will bedetermined 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 thismarket is on pace to test the November 2009 bottom at 84.83. A new main top at88.11 was formed on the daily chart. The trend will remain down until thisprice is penetrated.