USD/JPY hits the daily watchlist as it dances around a strong area of interest. Will traders finally pick a direction with a heavy calendar of U.S. data on Friday?
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Fresh Market Headlines & Economic Data:
- Trump pressed Ukraine leader to investigate Biden, memo reveals
- China says in close communication with U.S. over October trade talks
- Second-quarter U.S. GDP left at 2%, slower economic growth seen persisting
- Dallas Fed’s Kaplan says global economy ‘fragile’ but U.S. will ‘skate through’
- The United States’ international trade deficit was $72.8B in August, up $0.4B from $72.5B in July
- U.S. pending home sales rise more than expected in August
- Weak U.S. business investment, tepid profits cast shadow on economy
- UK PM Johnson says he will not ask for Brexit extension
- EU still awaits ‘legal and operational’ Brexit ideas from UK: Barnier
- UK parliament speaker says election cannot happen before October 31
- German consumers see rosier picture for October after ECB package
- ECB Economic bulletin: “the outlook for euro area real GDP growth has been revised down for 2019 and 2020”
- Annual Euro area growth rate of broad monetary aggregate M3 increased to 5.7% in August 2019 from 5.1% in July
- RBNZ Governor says unlikely to need unconventional monetary policy tools
- BOJ’s Kuroda warns of overseas risks, signals readiness to adjust policy
- Mid-to-long dated JGB yields rise after BOJ trims buying amount at operation
Upcoming Potential Catalysts on the Forex Calendar:
- U.K. Consumer confidence at 12:01 am GMT (Sept. 27)
- Japan Core CPI at 12:30 am GMT (Sept. 27)
- French CPI & Consumer spending at 7:45 am GMT (Sept. 27)
- BOE’s Saunders speaks in Farnsley at 8:00 am GMT (Sept. 27)
- U.S. Durable goods, Personal spending & income, Core PCE price index at 1:30 pm GMT (Sept. 27)
- U.S. Consumer sentiment at 3:00 pm GMT (Sept. 27)
What to Watch: USD/JPY
To close out the week, the economic calendar is looking pretty bare with exception to the U.S., which has a slew of potential catalysts. Most notable from the bunch is the update on durable goods orders (a leading indicator of manufacturing activity) and the Core PCE price index (the Federal Reserve’s preferred measure of inflation).
So, it’s likely we’ll see some action in the Greenback if these data points surprise us, and let’s not forget that it gets plenty of action from geopolitical developments, which seem to be in big supply with the latest Trump impeachment talk and developments in the U.S.-China trade story. We’ll pair the Greenback with the Japanese yen, which continue to respond well to global risk sentiment (tends to rise on rising risk aversion, fall on rising risk taking) and could see some action with an update on Japanese core CPI, albeit highly unlikely.
From a price action point of view, the pair can’t seem to break away from the 107.50 – 107.80 area, but at the moment it looks like the bears are in favor with 107.80 drawing in sellers once again on a retest.
If you’re a bear on this pair, the current geopolitical drama and price action currently works in your favor, and if the upcoming U.S. data disappoints, there could be one last leg lower before the weekend. A retest of that strong area of interest up to the major psychological handle (108.00) should be on your radar for bearish reversal patterns, and when targeting the recently swing low (around 107.00) you get a pretty attractive short-term R:R if using the daily ATR of around 60 pips.
If you’re a bull, positive U.S. economic updates and/or geopolitical developments will likely take this pair higher, so be on the lookout for that AND a break above 107.80 before considering a long position. And if that’s the case, going with a conservative “break-and-retest” entry strategy should be considered given how dynamic geopolitical stories can be. The potential R:R isn’t as attractive as a short play, but still may be worth going for if targeting the recent swing high around 108.50.