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USD/JPY Risks Larger Correction as RSI Divergence Takes Shape

USD/JPY Risks Larger Correction as RSI Divergence Takes Shape

2014-10-01 15:30:00
David Song, Strategist
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Talking Points:

- USD/JPY at Risk for Larger Pullback as RSI Divergence Takes Shape.

- AUD/USD Holds 2014 Low (0.8659) Even as Australia Retail Sales Disappoints.

- USDOLLAR Weighed by Weak ISM Manufacturing; RSI Remains Capped.

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USD/JPY

USD/JPY Risks Larger Correction as RSI Divergence Takes Shape
  • Despite the fresh 2014 high (110.08) in USD/JPY, the divergence in the Relative Strength Index (RSI) raises the risk for a larger correction should the oscillator fail to preserve the bullish momentum.
  • Series of failed attempts to close above 109.60-70 (100% expansion) may also provide additional confirmation/conviction for a further decline in the exchange rate.
  • Even though the DailyFX Speculative Sentiment Index (SSI) continues to show net-short dollar positioning, the ratio for USD/JPY has narrowed as it currently sits at -1.19.

AUD/USD

USD/JPY Risks Larger Correction as RSI Divergence Takes Shape
  • AUD/USD may face a bottoming process ahead of the Reserve Bank of Australia’s (RBA) October 7 meeting as it holds the January low (0.8659) & continues to close above the 0.8700 handle.
  • Would like to see the RSI come back from oversold territory & breakout of the bearish momentum to adopt a more bullish outlook for AUD/USD.
  • Australia’s economic docket may generate a more meaningful rebound over the next 24-hours as the trade deficit is expected to narrow to AU$800M from AU$1359M in July.

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Read More:

Price & Time: Greenback Still Shines

Scalping the AUDCHF Reversal- 8360 Resistance in Focus

USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

11064.99

11083.37

11034.68

0.16

93.31%

USD/JPY Risks Larger Correction as RSI Divergence Takes Shape USD/JPY Risks Larger Correction as RSI Divergence Takes Shape

Chart - Created Using FXCM Marketscope 2.0

  • Despite the 213K rise in the ADP Employment report, the Dow Jones-FXCM U.S. Dollar Index falls back from a fresh monthly high (11,083) as ISM Manufacturing disappoints, with the employment component narrowing to 54.6 58.1 in August.
  • Despite the series of higher-highs & lows in price, the RSI may highlight a more meaningful correction in the greenback should the oscillator remain capped around the 83 region.
  • Will continue to watch 11,120 (1.618% expansion) to 11,138 (61.8% expansion) ahead of the highly anticipated Non-Farm Payrolls (NFP) report, which currently shows expectations for a 217K rise.

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Release

GMT

Expected

Actual

MBA Mortgage Applications (SEP 26)

11:00

--

-0.2%

ADP Employment Change (SEP)

12:15

205K

213K

Markit US Manufacturing PMI (SEP F)

13:45

57.9

56.6

ISM Manufacturing (SEP)

14:00

58.5

56.6

ISM Prices Paid (SEP)

14:00

57.0

59.5

Construction Spending (MoM) (AUG)

14:00

0.5%

-0.8%

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--- Written by David Song, Currency Analyst

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

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