Talking Points:
- USD/JPY Mounts Larger Rebound- Expectations for Additional BoJ Support Lingers.
- EUR/USD Near-Term Outlook Hinges on More Detailed ECB Easing Cycle.
- USDOLLAR Rebound Approaches Next Hurdle- New, Existing Home Sales on Tap.
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USD/JPY
Chart - Created Using FXCM Marketscope 2.0
- USD/JPY may mount a larger recovery ahead of the Bank of Japan’s (BoJ) October 30 interest rate decision as the pair works its way back into the range from earlier this month, while the Relative Strength Index (RSI) threatens the bearish formation from back in May.
- With Japan unexpectedly posting another trade deficit in September, a greater willingness from the BoJ to further expand its asset-purchase program may threaten near-term resistance around 120.70 (50% retracement) to 121.00 (23.6% retracement) amid the deviating paths for monetary policy.
- DailyFX Speculative Sentiment Index (SSI)shows retail crowd remains net-long USD/JPY since June 8, but the ratio continues to come off of recent extremes as it narrows to +2.07, with 67% of traders long.
EUR/USD
- EUR/USD looks poised to retain the narrow range from earlier this week as market participants eagerly wait for the European Central Bank (ECB) rate decision amid speculation for a major announcement.
- Even though ECB President Mario Draghi is widely expected to endorse a dovish outlook for monetary policy, an attempt to buy more time may heighten the appeal of the Euro as market participants scale back bets for an imminent expansion/extension of the quantitative easing (QE) program.
- As EUR/USD holds above former resistance around 1.1260 (50% retracement) to 1.1270 (38.2% retracement), 1.1500 (23.6% retracement) to 1.1520 (61.8% expansion) remains the next region of interest especially as the RSI preserves the bullish formation from back in March.
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Read More:
USDOLLAR Holding Critical Support
NZDCAD Posts Outside Day Reversal Pre-BoC; Shorts Face 8700 Hurdle
USDOLLAR(Ticker: USDollar):
Index | Last | High | Low | Daily Change (%) | Daily Range (% of ATR) |
DJ-FXCM Dollar Index | 11948.25 | 11950.2 | 11926.29 | 0.13 | 53.28% |
Chart - Created Using FXCM Marketscope 2.0
- With the ongoing series of higher-highs, the Dow Jones-FXCM U.S. Dollar may continue to retrace the decline from earlier this month as the Federal Reserve largely keeps the 2015 liftoff on the table.
- Amid the ongoing slew of mixed data coming out of the U.S. economy, disappointing developments for Existing & New Home Sales may drag on interest rate expectations as Chair Janet Yellen remains in no rush to normalize monetary policy.
- In light of the recent advance, waiting on a close back above the Fibonacci overlap around 11,951 (38.2% expansion) to 11,965 (23.6% retracement) to favor additional dollar strength.
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--- Written by David Song, Currency Analyst
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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