USDJPY Back to 112.00?

USDJPY Back to 112.00?

Chart Of The Day

Despite rising equity markets, steady yields, positive economic data and the prospect of a Fed rate hike in December USDJPY has done nothing but slide lower over the past few weeks. What gives?

The problem for the pair is that the market remains skeptical about any further rate hikes in 2018. For now, the Fed funds futures curve is decidedly flat for 2018, with most traders concerned that the Fed will remain on the sidelines far into 2018 amidst the absence of any inflationary pressures.

A few weeks ago we noted that USDJPY has decoupled from many of its correlations including those with bonds and equities. That generally suggests further trouble for the currency as traders ignore the past beneficial relationships and only focus on possible risks. Tomorrow the market will get a glimpse of FOMC minutes which could send the pair lower if they do not offer an unambiguously hawkish message. For now, the 111.50 support remains key -- but a break there could usher in a tidal wave of selling all the way to 110.00

USDJPY – Can it Hit 112.00?

USDJPY – Can it Hit 112.00?

Chart Of The Day

Don’t look now but USDJPY is up nearly 400 pips since it hit swing lows nearly 10 days ago. The pair is forming a classic V-shaped bottom after being grossly oversold. Despite lackluster US economic data, traders are betting that the Fed will maintain its hawkish stance and will guide to confirm that a December rate hike is on track.

US yields have also expressed that sentiment as they rose at their fastest pace since November.

Tomorrow’s FOMC statement could be the make or break moment for the pair. If the Fed reaffirms that a rate hike is a possibility USDJPY could explode beyond 112.00 and could even push through the key resistance of 112.50 triggering massive short covering rally as a result.

Can Euro Break 1.1200?

Can Euro Break 1.1200?

Chart Of The Day

It’s been an extraordinarily quiet week for the EURUSD which has been trapped in 50 point range for with little movement in the past few days. The market appears to be in equilibrium as traders await the next batch of data next week that could provide some light on relative growth prospects of both US and EZ.

Meanwhile, tomorrow’s EZ Flash PMIs often serve as the earliest indications of conditions on the ground. Markets anticipate a slight decline perhaps tempered by a pullback in French data. However, if the data surprises to the upside it could provide a much-needed lift to euro bulls and shake the currency out of its stupor as it would suggest that growth in EZ region is actually accelerating which may force the ECB to curb QE faster.

Technically the pair remains in a 1.1000 -1.1300 corridor, but a break above 1.1200 would provide it with an upward bias and possible move all the way towards 1.1500.

USDJPY – Back to 112.00?

USDJPY – Back to 112.00?

Chart Of The Day

Although US data has continued to impress and US yields are once again within striking distance of the 2.50% level on the benchmark 10-year rate, USDJPY gave up most of its gains in late afternoon trade in NY today and is once again below the 115.00 barrier.

What flipped the pair lower? The problems with the dollar at this point are not economic but political. After weeks of anticipation, Donald Trump will finally take the reigns of power and the currency market may be having a case of buyers remorse. Now that Mr. Trump has to govern, his moves and pronouncements will be heavily scrutinized and if investors perceive that he is losing momentum with respect to economic reform, the rally in the dollar will quickly reverse. Today’s price action should send a note of caution to dollar bulls and if the pair loses the 114.00 figure in tomorrow’s trade it would suggest that another test of 112.00 is highly likely.