The US dollar climbed to session highs and strengthened against the yen on Monday, re-approaching last week’s almost six year peaks as weak Japanese economic data indicated that the economy is faltering. Data on Monday showed that Japan’s gross domestic product shrank by an annualized 7.1% in the second quarter, compared to a preliminary estimate for a 6.8% contraction.The report underlined concerns that the impact of a sales tax increase in April was larger than expected. Business spending fell 5.1% in the three months to June, while household spending dropped 10.4% on a year-over-year basis.The weak data indicated that the Bank of Japan is likely to stick to a loose monetary policy stance. In contrast, the Federal Reserve is expected to wind up its asset purchase program in October and to start raising interest rates sometime in mid-2015.
Intraday bias remains on the upside as 21 and 55 EMA trend indicators are crossed upward in the 1 hour, 4 hours, Daily,Weekly and Monthly charts are signalling the continuation of the bullish trend established since last month. SSRC, Stochastic, RSI and MACD Oscillator indicators are showing bullish momentum is still intact, so am expecting further rise to 106.524 resistance (Weekly R2) in the short term picture after price successfully broke 105.692 resistance (last week’s high).