US Dollar Weakens Further Ahead of FOMC Meeting, USDJPY Nears Multi-Week Low
US Dollar and USDJPY Price, News and Analysis:
- US dollar weakness continues with little in the way of visible support.
- USDJPY back below 104.00 and sentiment suggests further weakness.
The US dollar continues to slip lower and is on course to hit lows last seen in late-April 2018. While the greenback has been weak for some time, the latest leg lower is being driven by a risk-on theme in the market and news that the US FDA has approved the Pfizer vaccine with delivery and inoculation programs beginning immediately. There is also increased talk that a USD908 billion relief package may soon pass with both sides suggesting that they drop a series of contentious demands that are holding up progress. While this week’s FOMC meeting is unlikely to see any policy changes, the Fed may well continue to talk the US dollar lower, leaving the path of least resistance lower for the greenback.
The daily US dollar basket (DXY) chart has no areas of horizontal support visible, with a swing-low made back in February 2018 at 87.90 the next level of potential support.
US Dollar (DXY) Daily Price Chart (April – December 14, 2020)
USDJPY is back below 104.00, an area that has seen supportive jaw-boning by the Bank of Japan in recent weeks.The central bank seems to have stepped back after repeated breaks lower over the last month, leaving the November 6 multi-month low print at 103.17 vulnerable. The moving average set-up remains negative, while the CCI indicator is only just nudging into oversold territory.
USDJPY Daily Price Chart (January – December 14, 2020)
IG client sentiment data show 67.26% of traders are net-long with the ratio of traders long to short at 2.05 to 1.We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USD/JPY prices may continue to fall.Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USD/JPY-bearish contrarian trading bias.
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.