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Syrian relief and Chinese data lift the greenback

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Syrian relief and Chinese data lift the greenback

The dollar gained traction against the yen moving above 100 for the first time since mid-July on Tuesday on the heels of stronger than expected economic data out of China. After Russia and Syria embraced the suggestion from Secretary John Kerry to remove all the chemical weapons from their country to a neutral party, the greenback gained ground.

China reported August industrial output, retail sales and fixed asset investment on Tuesday.  Each rose more than expected.  This helps market participants solidify their perspective that the Chinese economy has stabilized.  Industrial output increased 10.4% year over year which is the strongest since March 2012 while the 13.4% year over year increase in retail sales is the strongest of the year.  Fixed asset investment rose 20.3%, which is the highest in the past quarter.  Yuan loans rose 711 billion from 700 billion in July.

The Euro on the other hand was under pressure after France reported worse than expected industrial output. Market participants had expected a 0.6% increase in July industrial output but instead, it dropped 0.6%.  It is the third consecutive decline and brings the year over year rate to -1.8% from 0.1% in June.  Manufacturing output contracted by 0.7% and transportation equipment was especially hard hit, declining by 6.7%.

The USDJPY edged above short term resistance near 100.20 and is poised to test horizontal trend line resistance near 100.86.  Support on the currency pair is seen near 99.23.  The RSI moved above resistance which is a positive sign for the currency pair.  The relative strength index is printing near 60 which is on the upper end of the neutral range.  Momentum is strong with the MACD (moving average convergence divergence index) printing in positive territory with an upward sloping trajectory. The spread continues to diverge away from the 9-day moving average of the spread which is a positive sign for price action.

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