EUR/USD Carves Bearish Harami (Inside-Day), RSI Tracks 2015 Trend

2017-01-30 15:56:00

Talking Points:

- USD/JPY Continues to Track Risk Sentiment Ahead of BoJ; Monthly Opening Range in Focus.

- EUR/USD Risks Further Losses as Bearish Harami (Inside-Day) Takes Shape, RSI Responds to 2015 Trend.

Currency	Last	High	Low	Daily Change (pip)	Daily Range (pip)
USD/JPY	113.80	115.16	113.74	128	142

USD/JPY Daily

Chart - Created Using Trading View

USD/JPY struggles to extend the near-term series of higher highs & lows as risk sentiment abates, with global benchmark equity indices under pressure going into the end of the month, but the failure to break/close below 112.40 (61.8% retracement) to 112.50 (38.2% retracement) keeps the topside targets in focus especially as the Relative Strength Index (RSI) appears to be deviating with price; will keep a close eye on the opening range for February as the pair continues to operate within a broader bull-flag formation.
The Bank of Japan (BoJ) is widely expected to retain the status quo at its first policy meeting for 2017 as the central bank continues to assess the impact of the quantitative/qualitative easing (QQE) program with Yield-Curve Control, but like the European Central Bank, Governor Haruhiko Kuroda and Co. may step up their efforts to stave off a ‘taper tantrum’ as they struggle to achieve the 2% target for inflation; deviating paths for monetary policy continues to cast a long-term bullish outlook for USD/JPY, with Fed Fund Futures still highlighting a 70% probability for a June rate-hike.
May see range-bound conditions going into the month ahead, with the topside capped by the Fibonacci overlap around 116.10 (78.6% expansion) to 116.60 (38.2% expansion).

Currency	Last	High	Low	Daily Change (pip)	Daily Range (pip)
EUR/USD	1.0691	1.0740	1.0620	2	120

EUR/USD Daily

Chart - Created Using Trading View

The lack of momentum to break above the Fibonacci overlap around 1.0780 (100% expansion) to 1.0790 (38.2% expansion) shifts the near-term focus for EUR/USD, with the pair at risk for further losses especially as it carves a bearish harami (inside-day) going into the end of the month; will keep a close eye on the RSI as it appears to be responding to the downward trend carried over from 2015, with a break of the near-term bullish formation providing confirmation/conviction for a further decline in the euro-dollar exchange rate.
With a slew of European Central Bank (ECB) officials scheduled to speak over the coming days, the Euro-Zone’s Gross Domestic Product (GDP) report may fail to influence the near-term outlook for the single-currency as the monetary union is projected to expand another annualized 1.7% during the last three-months of 2016; in turn, the region’s Consumer Price Index (CPI) may get increased attention as the headline reading is expected to expand at the fastest pace since 2013, but President Mario Draghi and Co. may continue to highlight a dovish outlook for monetary policy and boost its efforts to ward off a ‘taper tantrum’ in order to further insulate the euro-area.
Downside targets stand on the radar going into February, with a break/close below 1.0600 (23.6% expansion) opening up the next region of interest around 1.0470 (38.2% expansion) to 1.0500 (50% expansion) followed by 1.0410 (61.8% expansion) to 10.420 (100% expansion).

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