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USD/JPY settles near 135 following US data

Volatility has been minimal today and USD/JPY rather ignored several important macro releases.

The US dollar traded broadly lower on Monday, with the USD/JPY pair being the exception as the pair got some boost from rising US yields today. When writing, it was seen changing hands above the critical 135 level.

Market players paid attention to several notable US macroeconomic indicators today.

Manufacturing sector nears recession

The Manufacturing Survey from the Dallas Fed for June fell to its lowest level since May 2020 earlier in the day. The survey fell to -17.7 instead of rising slightly from -7.3 to -6.5 predicted. Employment fell off dramatically, and new orders went into the red.

The comments from survey respondents said:

– Everything we buy and sell comes and goes by truck if we can get a truck at any price. Inflation will continue until the country is self-sufficient in oil and gas. The current political policy may not change until 2024. Therefore, inflation will be our consistent companion for a while, then stagflation!
– We see the environment for the oil industry becoming even worse than in the previous months. Biden is promoting a very caustic attitude toward the oil industry, which doesn’t help the country in any way.

In other news, the US pending home sales surprisingly increased by 0.7% MoM in May (instead of falling by 4.0% MoM as predicted), while April’s figure was revised down from -3.9 to -4.0% monthly.

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This marks the end of a 6-month downward trend, and some speculated that the temporary reduction in mortgage rates in May may have been the catalyst for the minor upturn.

“Despite the small gain in pending sales from the prior month, the housing market is clearly undergoing a transition,” NAR’s chief economist Lawrence Yun said in a statement.

Last, US orders for durable goods increased by 0.7% monthly (with a slight downward revision from 0.5% to 0.4% in April). Excluding transportation, orders rose 0.7% month over month, above the forecast of 0.3%. After increasing by 0.3% a month earlier, the value of core capital goods orders—a proxy for equipment investment that excludes airplanes and military hardware—increased by 0.5%.

Short-term exhaustion

The daily chart shows some exhaustion as the bullish momentum wanes. As the USD has retreated against other currencies recently, we might also see some profit-taking here. However, as long as the USD remains above previous highs of 131.35, the medium and long-term uptrends remain intact.

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