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USD/JPY at Risk for Key Break Amid Deviation in BoJ, Fed Policy

USD/JPY at Risk for Key Break Amid Deviation in BoJ, Fed Policy

David Song, Strategist

Talking Points:

- USDOLLAR Outlook Turns Increasingly Bearish Ahead of 1Q GDP, FOMC & NFP

- USD/JPY to Face Increased Volatility Amid Deviation in BoJ, Fed Policy Outlook

- GBP/USD to Eye Higher High as U.K. Recovery Picks Up

The string of failed attempts to close above the 10,470 pivot highlights a bearish outlook for the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar), and the reserve currency may track lower ahead of the Federal Open Market Committee (FOMC) meeting should the fundamental developments coming out of the world’s largest economy dampen the outlook for growth and inflation.

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10455.18

10475.2

10451.75

-0.14

78.56%

The U.S. 1Q GDP report may heighten the bearish sentiment surrounding the greenback as the growth rate cools to an annualized 1.1 percent from 2.6 percent during the last three-months of 2013, and the Fed may continue to highlight a dovish tone for monetary policy as Chair Janet Yellen remains reluctant to move away from the highly accommodative policy stance.

However, the market reaction to a dovish FOMC interest rate decision may be short-lived as Non-Farm Payrolls are projected to increase another 210K in April, and a marked pickup in job growth may help to limit the downside for the greenback as it puts increased pressure on the central bank to normalize monetary policy sooner rather than later.

Nevertheless, the technical outlook continues to favor the downside targets for the USDOLLAR as price & the Relative Strength Index (RSI) retain the bearish trend from earlier this year, and we will continue to look for opportunities to ‘sell bounces’ in the greenback until we see a material shift in the Fed’s policy outlook.

USD/JPY at Risk for Key Break Amid Deviation in BoJ, Fed Policy

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

Read More:

Price & Time: Stability Begets Instability

EUR/USD, GBP/USD Hover Near Breakout Levels - Patience Required

USDOLLAR Daily

USD/JPY at Risk for Key Break Amid Deviation in BoJ, Fed Policy

Chart - Created Using FXCM Marketscope 2.0

  • String of Failed Attempts to Close Above 10,470 Highlights Lower High
  • Interim Resistance: 10,602 (38.2 retracement) to 10,615 (78.6 expansion)
  • Interim Support: 10,406 (1.618 expansion)

Release

GMT

Expected

Actual

Markit Purchasing Manager Index Composite (APR P)

13:45

--

54.9

Markit Purchasing Manager Index Services (APR P)

13:45

55.5

54.2

U. of Michigan Confidence (APR F)

13:55

83.0

84.1

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--- 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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