Trading insights: Chinese data boosts sentiment, AUD/USD, Silver prices climb, USD/JPY muted at key technical zone

China, AUD/USD, USD/JPY Talking Points

• Risk-off sentiment temporarily returns after China reports stronger than anticipated industrial production and upbeat retail sales data.
• USD/JPY weekly dragonfly doji cautions traders ahead of next week’s FOMC and BoJ rate decision.
• US stock indices muted with current weekly gains holding above 1% for US 30, US 100 and SPX500.

After another week of US dollar strength, stronger than expected data out of China offered a mild reprieve to risk assets, driving the greenback lower.

With the earlier release of Chinese industrial production and retail sales recovering from the July slump, the strong economic data provided some relief over the financial health of the world’s second largest economy.

In response to August’s report, silver prices soared on rising expectations of stronger industrial demand while both Brent and WTI crude held steady at four-month highs.

As the United States prepares to release their industrial production figures at 13:15 UTC, the release of the preliminary Michigan consumer sentiment for September could help provide insight into how US consumers expect the economy to perform in the near-term. With the US Federal Reserve expected to announce the next rate decision at Wednesday’s FOMC, the August retail sales and PPI prints released on Thursday came in stronger than expected, hinting at a still resilient US economy.

As the CME FedWatch tool highlights a 97% probability for the central bank to temporarily pause the rate hiking cycle, the Bank of Japan (BoJ) could possibly provide insight into when the central bank could shift away from its ultra loose monetary policy and negative rates toward a neutral 0.00% policy shift at 22 September BoJ decision.

CME FedWatch tool

USD/JPY technical analysis

While USD/JPY remains in a strong uptrend with year-to-date gains of 12.74%, the formation of a dragonfly doji on the weekly time-frame, is suggestive of a firm level of support and resistance forming slightly above the November 2022 high of 147.569.

For bullish continuation to be possible, buyers will need to drive prices above $148.00 resistance, in an effort to move towards the next big level of psychological resistance at 150.00.

In contrast, if sellers find momentum necessary to break below the 20 - day MA support zone around 146.2, it may be possible for Yen appreciation to persist, driving USD/JPY back toward 145.00.

USD/JPY weekly chart

Chart prepared on TradingView