US economic data for June and July have shown key data coming in relatively flat relative to the previous reading. Core PCE, personal spending and personal income for June came in at 0.1, 0.2 and 0.4 respectively against previous readings of 0.1, 0.7 and 0.4 respectively and for July came in at 0.1, 0.3 and 0.4 respectively against previous readings of 0.1, 0.3 and 0.4 respectively. Also core retail sales came in flat at 0.4 against previous value. Producer Price index came in lower than previous reading of 0.4 at 0.2 which matches core retail sales numbers and personal income readings. Core durable goods orders came in flat against previous reading at 0.6 and industrial production and capacity utilization rate increased to 0.6 and 78% respectively from previous values of 0.1 and 77.7% respectively. US Non-farm employment change for August dropped from 245k to 173k. We are of the opinion that the US economic data shows a relatively more steady economic growth than some of the other developed economies although there is nothing in the data released so far that suggests the US should hike rates in September. It is our view that it will be surprising if the FED does hike rates and given the released data we perceive a rate hike in September as more damaging to the US economy right now than productive.
Current price action is viewed as a continuation of wave 5 (possibly wave iii of 5) of a final corrective wave C which began on the 12th of August 2015 as shown. With 119.291 psychological support taken out as shown it is our view that the US Dollar is truly overbought and further downside could be seen in the USDJPY pair to 116.393 psychological support first. Further price close below there could see further drop to 113.063 support.
On the upside, we require a break of 125.08 resistance to reverse the current view and turn USDJPY again.