USD Struggles Ahead of Fed Rhetoric- JPY Threatens Key Support
Talking Points:
- USDOLLAR Struggling Ahead of Fed Rhetoric- Stalls Ahead of Former Support
- USDJPY Threatening Key Resistance; Japan 3Q GDP Revision in Focus
Index | Last | High | Low | Daily Change (%) | Daily Range (% of ATR) |
DJ-FXCM Dollar Index | 10617.5 | 10641.67 | 10592.05 | 0.22 | 100.07% |
USDOLLAR Daily
Chart - Created Using FXCM Marketscope 2.0
Rally Stalls Ahead of Former Support Which Could Offer New Resistance
Relative Strength Retains Bullish Trend- Approaching Overbought
Interim Resistance: 10,658 (61.8 extension)- Former Support
Interim Support: 10,590 (50.0 retracement)- Former Resistance
Release | GMT | Expected | Actual |
NFIB Small Business Optimism (Oct) | 12:30 | 93.5 | 91.6 |
Chicago Fed Nat Activity Index (Sep) | 13:30 | 0.15 | 0.14 |
Fed's Kocherlakota Speaks on Monetary Policy in St. Paul, MN | 18:00 | ||
Fed's Lockhart Speaks on Economy in Montgomery, Alabama | 18:50 |
The near-term rally in the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) appears to be stalling ahead of former support, and the greenback may face a more meaningful correction going into the middle of the week should we see Fed officials show a greater willingness to carry the highly accommodative policy stance into 2014.
Fresh comments from Atlanta Fed President Dennis Lockhart may prop up the dollar amid growing bets for a December taper, but Minneapolis Fed President Narayana Kocherlakota, who votes on the FOMC next year, may undermine the recent strength in the dollar as the central bank dove retains a cautious outlook for the U.S. economy.
Nevertheless, we will look for further advances in the greenback as long as the Relative Strength Index retains the bullish momentum carried over from the previous month, and will implement a ‘buy the dip’ strategy over the near-term as the dollar breakout gathers pace.
USDJPY Daily
Breakout Brings Up Key Resistance Ahead of 100.00
Bullish Relative Strength Index Confirms Break Higher
Interim Resistance: 99.80 (50.0 retracement) to 99.90 (61.8 retracement)
Interim Support: 97.50 (38.2 retracement expansion) to 97.70 (38.2 expansion)
The greenback advanced against three of the four components, led by a 0.49 percent decline in the Australian dollar, while the Japanese Yen is coming up against key support ahead of the preliminary 3Q GDP report.
Indeed, a downward revision in the growth rate may drag on the Yen as it undermines the Bank of Japan’s (BoJ) pledge to achieve the 2 percent target for inflation by 2015, and the bullish breakout in the RSI adds further conviction for a more meaningful move to the topside as market participants weigh the outlook for monetary policy.
The USDJPY may face a minor pullback as it comes up against resistance, but we also like buying dips in the dollar-yen as the longer-term bullish trend continue to take shape.
--- Written by David Song, Currency Analyst
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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