The Japanese yen retraced the decline from the previous day and is the only major currency higher against the greenback on Tuesday, and the USD/JPY may continue to trend lower throughout the North American trade as investors scale back their appetite for risk. The dollar-yen is down 0.11% on the day after moving 51% of its ATR, and the pair may continue to hold the downtrend from the April high as the October rally stalls ahead of the September high at 93.44. At the same time, we could see the USD/JPY continue to trade sideways throughout the week as investors weigh the outlook for future policy but nevertheless, as risk trends dictate price action in the currency market, the rebound in risk aversion may continue to drive the exchange rate lower over the month.
The British pound halted its five-day rally against the greenback and remains the worst performing currency on the day after slipping to a low of 1.6602, and the GBP/USD is likely to face increased volatility over the next 24 hours of trading as the Bank of England is scheduled to release its quarterly inflation report at 10:30 GMT tomorrow. The pound-dollar has fallen 0.26% from the open and has moved 97% of its average true range, and the pair may continue to come off the low as the 30-minute candles continue to close above the 200-SMA at 1.6620. Nevertheless, as the daily RSI approaches overbought territory, we may the GBP/USD consolidate over the week before it continues to retrace the decline from August, and may test the yearly high at 1.7045 later this month as U.K. policy makers see the nation emerging from the worst economic downturn since the post-war period.
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To discuss this report contact David Song, Currency Analyst: dsong@fxcm.com
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