USD/JPY Eyes Topside Targets Ahead of Trump & Abe Meeting

2017-02-09 16:28:00

Talking Points:

- EUR/USD on Brink of Further Losses as Greek Saga Continues; Draghi Sticks to Dovish Script.

- USD/JPY Clears Near-Term Range, Eyes Topside Targets Ahead of Trump & Abe Meeting.

Currency	Last	High	Low	Daily Change (pip)	Daily Range (pip)
EUR/USD	1.0668	1.0710	1.0656	30	54

EUR/USD Daily

Chart - Created Using Trading View

The failed attempt to test the December high (1.0873) keeps the near-term outlook for EUR/USD tilted to the downside, with the pair at risk of extending the recent series of lower-highs especially as the Greece-debt saga continues to undermine the stability of the monetary union; will be keeping a close eye on the RSI as it threatens trendline support and appears to be highlighting a bearish trigger, with the oscillator largely responding to the downward trend carried over from 2015.
Renewed concerns surrounding the periphery countries may spur a growing rift within the European Union (EU) especially as German Finance Minister Wolfgang Schedule rules out a Greek debt-cut and warns the Euro exchange rate is ‘too low’ for the region, but the European Central Bank (ECB) may keep the door open to further extend its quantitative-easing (QE) program as President Mario Draghi pledges to preserve an accommodative policy stance until his tenure expires in 2019.
In turn, a bearish RSI trigger accompanied by a break/close below the Fibonacci overlap around 1.0660 (50% expansion) to 1.0680 (78.6% expansion) may open up the next downside region of interest around 1.0600 (23.6% expansion) followed by 1.0470 (38.2% expansion) to 1.0500 (50% expansion).

Currency	Last	High	Low	Daily Change (pip)	Daily Range (pip)
USD/JPY	112.98	113.19	111.74	105	145

USD/JPY Daily

Chart - Created Using Trading View

With U.S. President Donald Trump and Japan Prime Minister Shinzo Abe schedule to meet on Friday, headlines emanating from the private talks may shake up the near-term outlook for USD/JPY, but the pair looks poised for a larger recovery as it breaks out of the narrow range from earlier this week; the Relative Strength Index (RSI) highlights a similar dynamic as it threatens the bearish formation carried over from late-December, and the turn in the oscillator accompanied by the pickup in the global benchmark equity indices shifts the near-term focus back towards the topside as the dollar-yen appears to be coming off of channel support.
Indeed, the broader outlook for USD/JPY remains confined by the descending channel from December, with the pair at risk of facing range-bound conditions ahead of the Fed’s next quarterly meeting in March especially as Chair Janet Yellen and Co. appear to be in no rush to further normalize monetary policy; in turn, risk sentiment may continue to influence the dollar-yen exchange rate throughout the first quarter as the Bank of Japan (BoJ) takes a similar stance and endorses a wait-and-see approach for monetary policy.
Nevertheless, the three-month old formation may appear more like a long-term bull-flag formation as the Fed appears to be on course to implement additional higher borrowing-costs over the coming months, with Fed Fund Futures still pricing a greater than 60% probability for a June rate-hike.
A closing price above 112.90 (38.2% retracement) may open up the next topside area of interest around 114.00 (23.6% retracement) to 114.30 (23.6% retracement) followed by 116.00 (78.6% expansion) to 116.30 (23.6% retracement).

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