Talking Points:
- Gold Breaks Out of 2015 Downward Trend- Eyes August Highs.
- USD/JPY Risks Further Losses Despite Slowing Japan Consumer Price Index (CPI).
- USDOLLAR Range Remains in Focus Amid Ongoing Mixed U.S. Data.
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XAU/USD
Chart - Created Using FXCM Marketscope 2.0
- With Gold prices breaking out of the downward trend from earlier this year, the precious metal may work its way back towards the August high ($1170) especially as the Relative Strength Index (RSI) retains the bullish formation from July.
- Despite the key themes that drive demand for bullion, market participants may continue to treat Gold as a commodity rather than a currency amid the disinflationary environment across the major industrialized economy accompanied by higher rate expectations for the U.S.
- DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long XAU/USD since late-August, but the ratio has come off of recent extremes as it narrows to +1.13, with 53% of traders long.
USD/JPY
- Even though USD/JPY continues to consolidate within wedge/triangle formation, may see a failure to preserve the monthly opening range on a close below near-term support around 119.60 (38.2% retracement) to 119.80 (100% expansion).
- With expectations for a slowdown in Japan’s Consumer Price Index (CPI), signs of weaker price growth may fuel speculation for a further expansion of the Bank of Japan’s (BoJ) asset-purchase program at the October 30 interest rate decision, but risk trends continue to dictate price action going into October as market participants weigh the outlook for monetary policy.
- The bearish RSI continues to highlight the risk for a further decline in USD/JPY, with a break of the monthly low (118.58) opening the door for a move back towards 118.20 (23.6% retracement) to 118.30 (78.6% expansion).
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Read More:
Price & Time: USD/CAD - Big Fibonacci Test Looms
Macro Musings: Who Thought The Fed Would Raise Rates in 2015?
USDOLLAR(Ticker: USDollar):
| Index | Last | High | Low | Daily Change (%) | Daily Range (% of ATR) |
|---|---|---|---|---|---|
| DJ-FXCM Dollar Index | 12046.67 | 12070.33 | 12021.33 | -0.14 | 97.31% |
Chart - Created Using FXCM Marketscope 2.0
- Dow Jones-FXCM U.S. Dollar may continue to consolidate going into the end of the month as there appears to be a failed test of the monthly high (12,095); may trade within a broad range over the near-term as the RSI remains capped by the bearish formation carried over from back in May.
- Even though the Fed keeps the 2015 liftoff on the table, the ongoing mixed batch of data coming out of the U.S. economy raises the risk for a more delayed normalization cycle amid the growing concerns surrounding the global economy; any meaningful revisions to the final 2Q Gross Domestic Product (GDP) may spark increased volatility for the greenback amid expectations for a December rate-hike.
- Failure to break 12,082 (61.8% expansion) along with the monthly high at 12,095 may spur a larger pullback, with the Fibonacci overlap around 11,951 (38.2% expansion) to 11,965 (23.6% retracement) coming back on the radar.
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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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