Talking Points:
- USD/JPY Continuation Pattern Unfolds Ahead of Bank of Japan (BoJ) Rate Decision.
- GBP/USD Range Vulnerable to Unexpected Slowdown in U.K Consumer Price Index (CPI).
- USDOLLAR Risks Fresh Monthly Highs on Sticky Inflation, Hawkish Fed Rhetoric.
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Chart - Created Using FXCM Marketscope 2.0
- USD/JPY looks poised for a move higher as the pair breaks out of the bull-flag formation, with the continuation pattern suggestive of a move higher; close above 123.30 (78.6% retracement) raises the risk for a move towards the August high (125.27).
- Despite the technical recession in Japan, the Bank of Japan (BoJ) is widely expected to endorse a wait-and-see approach at the November 19 interest rate decision, and more of the same from Governor Haruhiko Kuroda may limit the downside for the Yen as market participants scale back bets for a larger asset-purchase program.
- The DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long USD/JPY since June 8, but the ratio appears to be working its way back towards recent extremes as it climbs to +1.41, with 58% of traders long.
GBP/USD
- GBP/USD may struggle to retain the range-bound price action carried over from the previous month should the U.K. Consumer Price Index (CPI) show an unexpected slowdown in price growth and drag on interest rate expectations.
- With the Bank of England (BoE) in no rush to normalize monetary policy, easing price pressures accompanied by a 0.6% decline in U.K. Retail Sales may produce near-term headwinds for the sterling amid the ongoing 8-1 split within the Monetary Policy Committee (MPC).
- As GBP/USD retains the opening monthly-range and struggles to push back above former-support around 1.5250 (50% retracement), a close below 1.5180 (23.6% retracement) may open up the next major downside region of interest around 1.4910 (61.8% retracement) to 1.4930 (38.2% expansion).
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USDOLLAR(Ticker: USDollar):
| Index | Last | High | Low | Daily Change (%) | Daily Range (% of ATR) |
|---|---|---|---|---|---|
| DJ-FXCM Dollar Index | 12178.94 | 12182.39 | 12150.52 | 0.30 | 64.40% |
Chart - Created Using FXCM Marketscope 2.0
- Despite the mixed data prints coming out of the U.S. economy, USDOLLAR may continue to pare the decline from the previous week should Fed officials show a greater willingness to remove the zero-interest rate policy (ZIRP) at the December 16 interest rate decision.
- Will keep a close eye on the U.S. Consumer Price Index (CPI) amid market forecasts for sticky price growth; data reinforcing Fed expectations for achieving the 2% inflation target may heighten the appeal of the greenback as Chair Janet Yellen remains upbeat on the real economy.
- As a bull-flag appears to be playing out in the USDOLLAR, topside targets remain in focus, with the region of interest coming around 12,273 (161.8% expansion) to 12,296 (100% expansion).
Read More:
Price & Time: EUR/JPY - Flirting With Cyclical Breakdown
EUR/JPY on the Cusp of Important Move
US DOLLAR Technical Analysis: Set To Hold Key Support
--- Written by David Song, Currency Analyst
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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