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USDJPY Remains at Risk for Larger Correction- 100.50 in Focus

USDJPY Remains at Risk for Larger Correction- 100.50 in Focus

2014-02-25 17:00:00
David Song, Strategist
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Talking Points:

- USDOLLAR Retains Bearish Momentum; Lower High in Place?

- Japanese Yen Benefits From Risk Aversion; At Risk for Larger Correction

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10556.22

10576.77

10547.63

-0.13

81.51%

USDOLLAR Daily

Forex_USDJPY_Remains_at_Risk_for_Larger_Correction-_100.50_in_Focus_body_Picture_3.png, USDJPY Remains at Risk for Larger Correction- 100.50 in Focus

Chart - Created Using FXCM Marketscope 2.0

  • Carving Lower-High Amid Failure to Push Above Former Support (10,615)
  • Interim Resistance: 10,657 (61.8 expansion)- Former Support
  • Interim Support: 10,509 (23.6 retracement) to 10,524 (38.2 retracement)

Release

GMT

Expected

Actual

House Price Index (MoM) (4Q)

14:00

0.3%

0.8%

House Price Purchase Index (QoQ) (DEC)

14:00

1.00%

1.20%

S&P/CS 20 City (MoM) SA (DEC)

14:00

0.60%

0.76%

S&P/CS Composite-20 (YoY) (DEC)

14:00

13.40%

13.42%

S&P/Case-Shiller Home Price Index n.s.a. (4Q)

14:00

165.50

165.69

S&P/Case-Shiller Home Price Index n.s.a. (4Q)

14:00

150.39

S&P/Case-Shiller Home Price Index n.s.a. (YoY) (FEB)

14:00

11.30%

Consumer Confidence Index (FEB)

15:00

80.0

78.1

Richmond Fed Manufact. Index

15:00

5

-6

Fed's Tarullo Speaks on U.S. Economy

15:10

Fed's Dudley to Speak at Basel Event

20:45

The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) bounced back from a fresh weekly low of 10,547 despite the larger-than-expected decline in Consumer Confidence, but the bearish sentiment surrounding the greenback may gather pace over the near-term as the recent slowdown in the world’s largest economy limits the Federal Open Market Committee’s (FOMC) scope to normalize monetary policy sooner rather than later.

With the FOMC moving away from its easing cycle, board member Daniel Tarullo argued that the central bank must consider the spillover effects to the emerging markets, and the dollar may face further headwinds over the near-term should we see a growing number of Fed officials scale back their willingness to lift the benchmark interest rate off of the record-low.

With that said, a further deterioration in the interest rate outlook may ultimately lead the USDOLLAR to give back the rebound from back in October (10,354), and we continue to favor ‘selling bounces’ in the reserve currency as the Relative Strength Index retains the bearish momentum carried over from the previous month.

Join DailyFX on Demandto Cover Current U.S. Dollar Trade Setups

Forex_USDJPY_Remains_at_Risk_for_Larger_Correction-_100.50_in_Focus_body_ScreenShot145.png, USDJPY Remains at Risk for Larger Correction- 100.50 in Focus

USDJPY Daily

Forex_USDJPY_Remains_at_Risk_for_Larger_Correction-_100.50_in_Focus_body_Picture_1.png, USDJPY Remains at Risk for Larger Correction- 100.50 in Focus
  • RSI Struggling to Retain Bullish Trend; Lower High at 1.3770?
  • Interim Resistance: 103.30 (23.6 retracement) to 103.50 (100.0 expansion)
  • Interim Support: 100.50 (61.8 expansion) to 100.70 (61.8 expansion)

The greenback weakened against three of the four components, led by a 0.32 percent advance in the Japanese Yen, and the USDJPY may face a larger correction in the days ahead as the bullish RSI momentum comes under pressure.

Indeed, a downside break in the oscillator may spark another move towards 100.50-70 as the USDJPY appears to be carving a lower high in February, and the pair may even threaten the bullish trend from 2013 as the Bank of Japan (BoJ) remains reluctant expand its asset-purchase program.

In turn, we may see the near-term correction in the USDJPY gather pace going into March, and will continue to watch the downside targets for the dollar-yen as the pair fails to put in a close above the 102.50 region during the final days of February.

--- 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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