The dollar has opened the week on a consolidative footing after tumbling to fresh trend lows last week. USDJPY, after last week posting a four-month low at 108.28, has been pivoting around 108.80 so far today. EURJPY and other yen crosses are similarly devoid of directional impulse. There is some argument in favour of a rebound in the case of USDJPY, and the dollar more generally. Firstly, the BoJ intimated today that last week’s post-meeting remarks on inflation shouldn’t be over interpreted. Secondly, this week’s FOMC meeting (announcing Wednesday), which will be Yellen’s last as Fed chairperson, is likely to see the Fed upgrade its balance of risks assessment with regard the growth outlook while working in a slightly more hawkish tone on inflation, which in the event would likely shore up some support for the dollar.
The USDJPY is underperforming since January 8, however at the short-term picture the pair showed an upside trend so far today with immediate support at 108.50 and a daily at 108.00-20. Initial resistance is at 109.10 and next Daily one is at 109.50. By making higher highs and higher lows, the pair manage to pick up so far today by nearly 51 pips.
However, despite the positive momentum seen today, the momentum indicators are mix but are still looking weak. The intra-day RSI is still weak at 47, failing to break above neutral, suggesting that the latest upswing may be running out of steam. Moreover, the MACD lines remain negative however are sloping upwards closer to neutral level, while Stochastic manage to pick up to 75, but is consolidating the last 3 hours below the overbought territory. Meanwhile, the price retested the upper boundary of the Bollinger Band and the PP level of the day at 108.90, but failed to move these level and hence it is currently turned lower below the 5, 9 and 20-period EMAs, indicating weakness.
Therefore the pair remains under pressure within the day, as 3 bearish hourly candle seem to be formed soonish. The downside movement still holds and hence it is likely to see today another retest of the immediate support levels at 108.50 and 108.30. If the price reverse higher, resistance comes at 109.00-109.10.
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