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USD Relief Rally Taking Shape- Bullish JPY Momentum Falters

USD Relief Rally Taking Shape- Bullish JPY Momentum Falters

David Song, Strategist

Talking Points:

- USDOLLAR Recovery in Focus Amid Budget Talks

- Bearish USDJPY Momentum Falters Despite Upbeat Bank of Japan (BoJ)





Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index







Forex_USD_Relief_Rally_Taking_Shape-_Bullish_JPY_Momentum_Falters_body_Picture_3.png, USD Relief Rally Taking Shape- Bullish JPY Momentum Falters

Chart - Created Using FXCM Marketscope 2.0

  • Opening Monthly Range Remains Intact; Bottoming Process in Focus
  • Relative Strength Index Carving Bullish Trend
  • Interim Resistance: 10,582 (23.6 expansion) to 10,589 (50.0 retracement)
  • Interim Support: 10,470 Pivot





Initial Jobless Claims (Oct 5)




Continuing Claims (Sep 28)




Fed's Bullard to Speak on Monetary Policy in St. Louis


Fed's Tarullo Speaks on Regulatory Reform in Washington


Fed's Williams Speaks on the Economy in Boise, Idaho


The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) continued to pare the sharp decline from the previous month as Congress tries to draw up a near-term resolution to raise the debt-limit, and the greenback may come up against key resistance as a relief rally appears to be under way.

However, the Federal Open Market Committee (FOMC) Minutes suggests that we may see a further delay of the exit strategy as most officials favor a ‘cautious’ approach in tapering the asset-purchase program, and the central bank may stick to its highly accommodative policy stance at the October 29-30 meeting in an effort to further combat the fiscal drag.

In turn, the greenback may face additional headwinds over the remainder of the week should U.S. policy makers struggle to meet on common ground, and the government shutdown may continue to raise the risk of seeing the Fed carry its highly accommodative policy stance into the following year in order to further insulate the real economy.

Forex_USD_Relief_Rally_Taking_Shape-_Bullish_JPY_Momentum_Falters_body_ScreenShot222.png, USD Relief Rally Taking Shape- Bullish JPY Momentum Falters


Forex_USD_Relief_Rally_Taking_Shape-_Bullish_JPY_Momentum_Falters_body_Picture_1.png, USD Relief Rally Taking Shape- Bullish JPY Momentum Falters
  • Threatening Downward Trending Channel From September
  • RSI Breaks Bearish Momentum
  • Interim Resistance: 98.50 Pivot to 98.75 (50.0 retracement)
  • Interim Support: 96.40 (23.6 expansion) to 96.55 (50.0 expansion)

Three of the four components rallied against the greenback, led by a 0.21 percent advance in the Australian dollar, while the Japanese Yen bucked the trend, with the low-yielding currency weakening 0.73 percent.

With the U.S. government shutdown taking center stage, the dollar-yen showed a limited reaction to Bank of Japan (BoJ) Governor Haruhiko Kuroda even as the central bank head continued to strike a more neutral tone for monetary policy, but the policy outlook may limit the downside risk for the Japanese Yen as the board sticks to the sidelines.

Indeed, the break of the bearish RSI momentum may pave the way for a more meaningful rebound for the USDJPY, and headlines coming out of the U.S. government may continue to prop up the pair over the near-term as the government shutdown could be coming to an end.

--- Written by David Song, Currency Analyst

To contact David, e-mail Follow me on Twitter at @DavidJSong.

To be added to David's e-mail distribution list, please follow this link.

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