British Pound Continues to Outperform, Japanese Yen Loses Ground
The British pound surged higher following the Bank of England Minutes to remain the best performing currency against the greenback, and the currency may continue to retrace the sell-off from the previous month as policy makers hold an improved outlook for the economy. The GBP/USD has rally 230+pips on the day and has moved nearly 160% of its daily ATR, and the lack of momentum to break above 1.6650 may lead the pair to fall back below 1.6600 as it remains overbought. Nevertheless, as the pound-dollar remains support by the 100-Day SMA (1.6354), we may see the pair continue to rally over the remainder of the week as economists forecast 3Q GDP to expand 0.2% from the three-months through June, and may work its way towards 1.6700 to test the September high for near-term resistance.
The USD/JPY advanced for the second day and the Japanese yen is the worst performing currency against the greenback next to the Canadian dollar, and the exchange rate may continue to push higher over the week following the rebound in market sentiment. However, as the dollar-yen fails to push above the previous week’s high (91.33), we may see the pair continue to hold a narrow range over the week as it search for a top, and the lack of momentum to mark higher highs could lead the USD/JPY to pare the advance from earlier this month. Nevertheless, as the Bank of Japan maintains a cautious outlook for the domestic economy and expects the region to face headwinds going into the following year, growth concerns may stoke increased speculation for a currency intervention as global trade conditions remain weak.
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