Talking Points:
- USD/JPY Carves Bearish Pattern as Retail Positioning Approaches Extreme.
- NZD/USD RSI Pushes Into Overbought; Rally Vulnerable to Weak 3Q CPI Report.
- USDOLLAR Rebounds From Fresh Monthly Low on Sticky CPI- Outlook Mired by Bearish Formation.
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Chart - Created Using FXCM Marketscope 2.0
- USD/JPY downside targets remain in focus as the pair fails to hold near-term support levels and carves a series of lower highs & lows; will keep a close eye on the Relative Strength Index (RSI) as a break below 30 raises the risk for a further decline.
- With Bank of Japan (BoJ) Governor Haruhiko Kuroda scheduled to speak going into the weekend, more of the same from the central bank head may heighten appeal of the Yen & dampen bets for a further expansion of the asset-purchase program at the October 30 interest rate decision.
- Despite the decline, DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long USD/JPY since June 8, but the ratio is approaching recent extremes as it climbs to +2.81, with 74% of traders long.
NZD/USD
- The near-term rally in NZD/USD may gather pace as it breaks near-term resistance around 0.6690 (161.8% expansion) to 0.6710 (50% retracement), while the RSI pushes into oversold territory.
- Even though the Reserve Bank of New Zealand (RBNZ) stands ready & willing to further reduce the overnight cash rate, stickiness in the third-quarter Consumer Price Index (CPI) may boost rate expectations as the headline reading for inflation is expected to hold steady at an annualize rate of 0.3%.
- As NZD/USD pushes to fresh monthly highs, a break/close above 0.6890 (50% expansion) to 0.6900 (100% expansion) may expose next region of interest around 0.6950 (38.2% retracement) to 0.6980 (38.2% expansion).
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Read More:
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Dollar Dive Deepens as Rate Hike Bets Move Further Out
USDOLLAR(Ticker: USDollar):
| Index | Last | High | Low | Daily Change (%) | Daily Range (% of ATR) |
|---|---|---|---|---|---|
| DJ-FXCM Dollar Index | 11875.65 | 11915.62 | 11854.5 | -0.04 | 125.34% |
Chart - Created Using FXCM Marketscope 2.0
- The Dow Jones-FXCM U.S. Dollar bounced back from a fresh monthly low (11,854) following the better-than-expected U.S. Consumer Price Index (CPI) figure, but the failure to hold above the September low (11,865) raises the risk for a further decline amid the recent string of lower highs & lows.
- Despite the stickiness in the core rate of inflation, the bearish tilt on the RSI may foster a larger decline in the greenback as market participants scale back bets for a 2015 Fed rate-hike.
- Failure to close above11,898 (50% retracement) to 11,901 (78.6% expansion), opens up the downside target, with the next region of interest surrounding the Fibonacci overlap around 11,826 (61.8% expansion) to 11,843 (38.2% retracement).
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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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