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USD/JPY Continues to Coil Ahead of Japan CPI, Month-End Flows

USD/JPY Continues to Coil Ahead of Japan CPI, Month-End Flows

Talking Points:

- USD/JPY Range in Focus Ahead of Japan Consumer Price Index (CPI).

- AUD/USD Falls Back from Monthly High Ahead of Australia 3Q Private Capital Expenditure.

- USDOLLAR Preserves Bull-Flag Formation Despite Mixed U.S. Data.

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USD/JPY

USD/JPY Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Even though USD/JPY struggles to preserve the bullish formation from October, the pair may face range-bound prices in the days ahead as the pair continues to close above 1.2240 (78.6% retracement) following the breakout from earlier this month; will continue to watch former support around 123.80 (50% expansion) for near-term resistance.
  • Despite forecasts for a slowdown in Japan’s core-core Consumer Price Index (CPI), the Bank of Japan (BoJ) looks poised to retain its current policy at the December 18 interest rate decision as Governor Haruhiko Kuroda remains upbeat on the economy and sees the central bank achieving the 2% inflation goal over the policy horizon.
  • The DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long USD/JPY since November 18, but the ratio appears to be working its way back towards recent extremes as it climbs to +1.51 as 60% of traders are now long.

AUD/USD

AUD/USD Daily Chart
  • AUD/USD may continue to fall back from a fresh monthly high (0.7282) as Australia’s 3Q Private Capital Expenditure report is expected to show another 2.9% decline following the 4.0% contraction during the three-months through June.
  • Even though the Reserve Bank of Australia (RBA) keeps the door open to further embark on its easing cycle, more of the same at the December 1 policy meeting may generate range-bound prices in AUD/USD as the pair appears to be trapped in a wedge/triangle formation.
  • Failed attempts to close above 0.7270 (38.2% retracement) may foster a larger pullback in the days ahead, with the first downside region of interest coming in around 0.7180 (61.8% retracement).

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USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index12159.2912185.7412140.26-0.02106.64%

Chart - Created Using FXCM Marketscope 2.0

  • Despite the mixed data prints, long-term outlook for the USDOLLAR remains tilted to the upside as the bull-flag formation continues to take shape; will retain the approach to ‘buy-dips’ in the greenback amid expected for a December Fed rate-hike.
  • With the Thanksgiving holiday quickly approaching, thin market conditions may produce choppy/whipsaw-like price action until full market participation returns next week, with market attention turning to the U.S. Non-Farm Payrolls (NFP) report, which is expected to show another 200K expansion in November.
  • As the continuation pattern remains in play, USDOLLAR may continue to coil for a run at 12,273 (161.8% expansion) to 12,296 (100% expansion) as it continues to hold above former-resistance around 12,049 (78.6% retracement) to 12,082 (61.8% expansion), with the topside region of interest standing around.

*As we approach the holidays and thus illiquid markets, it's worth reviewing principles that help protect your capital. We call these principles the "Traits of Successful Traders."

Three Factors Warn of Perfect Storm in FX Markets - Caution Advised

Read More:

Bearish AUDJPY as Topping Pattern Matures, Awaiting Key Support Break

COT - Largest AUD Net Spec Short Position Since March

USD/JPY Technical Analysis: Shaken, Not Stirred Above 122

Webinar: Dollar Crosses at Key Juncture Ahead of US Holiday

--- Written by David Song, Currency Analyst

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

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