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The dollar gains ground after strong data

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The dollar gains ground after strong data

The dollar gained strength against the yen on Thursday as a combination of a better than expected second quarter US GDP print and worse than expected Japanese retail sales, pushed  the yield differential in favor of the greenback.  Solid jobless claims data that hit the tape also was a boost for the US.

July retail sales for Japan came in weaker expected printing at 0.3% year over year, versus expectations for +0.4% and +1.6% in June, with the decline led by a 6.2% drop in auto sales.  Overall, Japan’s earnings growth remains subdued.  Consumer sentiment seems to have peaked in May according to the latest government report.

Japan ministry of finance weekly portfolio flows data showed the second straight week of foreign bond selling by Japanese investors.  Investors sold a net 318.5 billion in the week to August 23, compared to just over 900 billion of net sales the previous week.

In the US, second quarter GDP data showed an increase to 2.5% compared to the initial 1.7% print.  The increase pushed US yields higher, driving investors into the greenback.  Also of note, jobless claims declined by 6K to 331,000, according to the Labor Department. Claims for the prior week were revised to show 1,000 more applications received than previously reported. Economists had expected first-time applications to fall to 332,000 last week.

The USDJPY is approaching a downward sloping trend line that comes in a 98.80.  A close above this level would likely lead to a test of resistance near 100.  Support is seen near the 10-day moving average at 97.92.  Momentum has increased with the MACD printing in positive territory.  The MACD has been in a consolidation pattern, and a breakout would likely coincide with a buy signal.  The RSI is printing near 52, which is in the middle of the neutral range.

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