Thursday, October 11, 2018

USD/JPY - 12 October 2018


Fundamental Highlights

The Dollar/Yen pair ranges between 111.83 and 112.53 as investors look for more clues to explain a further drop in the U.S Dollar. Yesterday's CPI figures did not bode well for the greenback proving investors right for shorting the U.S Dollar when it reached a 7-week high on Tuesday. The year over year Core CPI printed at 2.2% compared to the expected 2.3% signaling that the U.S economy is not showing any significant signs of overheating. The non existence of overheating means that investors are seeing no reason for the Fed to act ultra hawkish with their monetary policy. Before another sell off lower, investors are probably awaiting for a FOMC member to provide comments relating to the future of rate hikes given the recent inflation data miss and the sell off in the U.S equity markets.

Technical Analysis

The pair is cooling off within the 111.83 - 112.53 range just below the major 200-period moving average. The fact that prices are trading below the 200-period moving average means that general market sentiment remains bearish. Most recently, the 13-period moving average crossed below the 200-period moving average signaling that the bearish momentum is likely to continue and guide the pair lower. Range trading will end if the pair breaks below the 111.83 support level signaling a continuation in the downtrend of the pair and paving the way for a drop towards 111.37. Range trading will also end if investors change their opinion regarding the U.S Dollar by breaking above both the 112.53 resistance level and the 200-period moving average. Keep in mind that a break above the 200-period moving average will signal a shift in the long term trend of the pair and expose the 112.83 level as a start.

Support: 111.83 111.37
Resistance: 112.53 112.83

Chart (H4)