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USD/JPY Tempts Break, Liquidity Returns with EUR/USD at 200DMA

USD/JPY Tempts Break, Liquidity Returns with EUR/USD at 200DMA

John Kicklighter, Chief Strategist

Talking Points:

  • Monday's session was curbed by the US/UK holidays reining in speculative appetites
  • USD/JPY and AUD/JPY managed short-term technical breaks, but their meaning is undermined by liquidity
  • The event risk picks up quickly ahead with the Fed's favored inflation data, Eurozone data and Aussie GDP ahead

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Holiday trading conditions kept most of the key technical boundaries - like the EUR/USD 200-day moving average as support - in place. However, there were a few provocative moves to whet traders appetites this past session. Global equities marked a slow advance Monday with after-hours trading pushing the S&P 500 derivatives closer to the range and record highs frequented over the past 12 months.

It was the USD/JPY though that managed a technical break on a closely watched channel top that drew greater attention from the FX crowd. If we operated on technicals in a vacuum, this may all the catalyst necessary. Yet, conviction and the market depth necessary to carry such a move forward is crucial for follow through - and there is little profit to be made on a breakout without follow through.

Will we find more conviction as liquidity fills out moving forward? We certainly have plenty of event risk to jump start the engine. And, there are plenty of technical patterns that present promising opportunities. We discuss the sparks and fuel ahead in today's Trading Video.

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.