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USD Struggles to Hold Fed-Driven Rally as GDP, Home Sales Disappoint

USD Struggles to Hold Fed-Driven Rally as GDP, Home Sales Disappoint

David Song,

Talking Points:

- USDOLLAR Struggles Following FOMC as U.S. Data Continues to Disappoint.

- USD/JPY Rebound to Unravel on Wait-and-See BoJ Policy.

- AUD/USD Continues to Search for Support Ahead RBA Interest Rate Decision.

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USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index12087.7912106.4412078.45-0.0555.68%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Despite the bullish reaction to the Federal Open Market Committee (FOMC) interest rate decision, the Dow Jones-FXCM U.S. Dollar struggles to retain the advance as the U.S. 3Q Gross Domestic Product (GDP) showed the economy growing an annualized 1.5% after expanding 3.9% during the three-months through June, while Pending Home Sales unexpectedly contracts 2.3% in September.
  • Even though the Fed keeps the door open for a 2015 liftoff, the disinflationary environment accompanied by the slowdown in economic activity may push the central bank to further delay its normalization cycle as the mixed data prints undermine the committee’s expectation for a stronger recovery.
  • Will stay constructive on the greenback as long as the Relative Strength Index (RSI) preserves the bullish momentum from back in June, with the next topside region of interest coming in around 12,162 (April high) to 12,176 (78.6% expansion).

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USD/JPY Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • USD/JPY may make a larger run at near-term resistance around 121.70 (50% retracement) to 121.80 (38.2% expansion) amid speculation of seeing the Bank of Japan (BoJ) further expand its asset-purchase program at the October 30 interest rate decision; may see the dollar-yen continue to retrace the decline from August as bullish RSI formation takes shape.
  • Even though the BoJ keeps the door open to further embark on its easing cycle, may see Governor Haruhiko Kuroda merely push back the deadline to achieve the 2% inflation target as the central bank head remains largely upbeat on the economy.
  • DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long USD/JPY since June 8, but the ratio remains off of recent extremes as it narrows to +1.67 as 62% of traders are long.

Read More:

Price & Time: EUR/USD – Make or Break Level Here?

EUR/JPY in Free Fall Ahead of BoJ- Bearish Sub 134


AUD/USD Daily Chart
  • AUD/USD stands at risk of giving back the rebound from September as it struggles to find support; close below 0.7080 (38.2% expansion) to 0.7090 (78.6% retracement) may highlight a further decline especially as the RSI fails to retain the bullish pattern carried over from the previous month.
  • In light of the unexpected slowdown in Australia’s Consumer Price Index (CPI), there’s growing speculation the Reserve Bank of Australia (RBA) will adopt a more dovish outlook at the November 3 interest rate decision in an effort to further insulate the real economy.
  • Downside targets remain in focus going into the end of the month, with the next region of interest coming in around 0.6950 (161.8% expansion) to 0.6970 (50% expansion).

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--- Written by David Song, Currency Analyst

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

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