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USDJPY to Target 102.50 on Stagnant Japanese Inflation

USDJPY to Target 102.50 on Stagnant Japanese Inflation

2013-11-27 17:15:00
David Song, Strategist
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Talking Points:

- USDOLLAR Remains Capped by Former Support; Carving Top?

- USDJPY Clears 102.00 Ahead of Japan Consumer Price Index (CPI)

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10649.94

10649.94

10609.94

0.23

82.91%

USDOLLAR Daily

Forex_USDJPY_to_Target_102.50_on_Stagnant_Japanese_Inflation_body_Picture_3.png, USDJPY to Target 102.50 on Stagnant Japanese Inflation

Chart - Created Using FXCM Marketscope 2.0

  • May Threaten Bullish Trend as Former Support Serves as New Resistance
  • Relative Strength Index to Provide Confirmation/Conviction for Bearish USD Forecast
  • Interim Resistance: 10,658 (61.8 extension)- Former Support
  • Interim Support: 10,470 Pivot- Closing Basis

Release

GMT

Expected

Actual

MBA Mortgage Applications (NOV 22)

12:00

930K

-0.3%

Initial Jobless Claims (NOV 23)

13:30

330K

316K

Continuing Claims (NOV 16)

13:30

2850K

2776K

Durable Goods Orders (OCT)

13:30

-2.0%

-2.0%

Durable Goods Orders ex Transportation (OCT)

13:30

0.5%

-0.1%

Non-Defense Capital Goods Orders ex Aircrafts (OCT)

13:30

0.8%

-1.2%

Non-Defense Capital Goods Shipments ex Aircrafts (OCT)

13:30

-0.2%

-0.2%

Chicago Fed National Activity Index (OCT)

13:30

0.10

-0.18

Chicago Purchasing Manager (NOV)

14:45

60.0

63.0

U. of Michigan Confidence (NOV F)

14:55

73.1

75.1

Leading Indicators (OCT)

15:00

0.0%

0.2%

Despite the mixed batch of data coming out of the world’s largest economy, the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) appears to be making another run at resistance following the upward revision to the U. of Michigan Confidence survey, and the greenback may retain the range-bound price action throughout the holiday trade as market participants weigh the outlook for monetary policy.

With market participation thinning during the Thanksgiving holiday, end-of-month flows may provide choppy to whipsaw-like price action across the major currencies, but the current fundamental themes, especially the outlook for monetary policy, may continue to influence near-term price action as we look towards the last set of interest rate decisions for 2013.

Nevertheless, the technical outlook suggests that the rebound off of 10,354 may have been a mere correction asthe Relative Strength Index turns around ahead of overbought territory, and the greenback could be in a topping process should the oscillator fail to maintain the upward trend carried over from the previous month. In turn, if the November high (10,661) turns out to be a lower high on a longer-term series, the technicals may call for USD weakness in December, but a taper from the Fed would spur a more bullish outlook for the greenback as the central bank moves away from its easing cycle.

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Forex_USDJPY_to_Target_102.50_on_Stagnant_Japanese_Inflation_body_ScreenShot013.png, USDJPY to Target 102.50 on Stagnant Japanese Inflation

USDJPY Daily

Forex_USDJPY_to_Target_102.50_on_Stagnant_Japanese_Inflation_body_Picture_1.png, USDJPY to Target 102.50 on Stagnant Japanese Inflation
  • Narrow Channel Continues to Take Shape; Trendline Resistance in Focus
  • Bullish Relative Strength Index Points to Further Gains; Climbs Back Above 70
  • Interim Resistance: 102.50-60 (78.6 expansion)
  • Interim Support: 100.60 (61.8 expansion) to 100.80 (61.8 expansion)- Former Resistance

The greenback rallied against three of the four components, led by a 0.88 percent decline in the Japanese Yen, and the low-yielding currency may face additional headwinds over the next 24-hours of trading should the Consumer Price Index undermine the Bank of Japan’s (BoJ) pledge to achieve the 2 percent target for inflation by 2015.

With the headline reading for inflation expected to increase another 1.1 percent in October, stagnant price growth may limit the BoJ’s scope to retain its wait-and-see approach, but it seems as though Governor Haruhiko Kuroda will stick to the sidelines until Prime Minister Shinzo Abe unveils the ‘Third Arrow’ stimulus package.

With that said, expectations surrounding the Federal Open Market Committee (FOMC) December 17-18 meeting may continue to limit the downside for the USDJPY as we head into the final days of November.

--- Written by David Song, Currency Analyst

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

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

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