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Will the dollar domination extend through today’s U.S. session trading?

Today I’ll be looking at NZD/JPY’s potential mid-range bounce before and while Powell takes center stage.

Before moving on, ICYMI, today’s Asia-London session watchlist checked out GBP/AUD for a potential Fib bounce ahead of China’s business data and the U.K.’s GDP reading. Be sure to check out if it’s still a valid play!

And now for the headlines that rocked the markets in the last trading sessions:

Fresh Market Headlines & Economic Data:

NZ business confidence improves despite extended Covid restrictions

NZ new home building reaches another record high in August

Australian home lending in August expanded at its fastest annual pace since early 2018 as more borrowed to get into a red-hot market

Japan’s August factory output extends declines on car production cuts

China’s manufacturing activity unexpectedly shrinks in September, services offer support

Asian stocks steady as calm returns but jitters keep dollar firm

UK economy bounced back by more than thought in Q2

French inflation hit near 10-year high of 2.7% in September

German unemployment falls in September despite supply bottlenecks

Dollar hovers near 1-year high as Fed tightening in focus, iron ore prices boost Aussie

Upcoming Potential Catalysts on the Economic Calendar:

Italy’s unemployment rate at 8:00 am GMT
Eurozone’s unemployment rate at 9:00 am GMT
U.S. final GDP reading at 12:30 pm GMT
U.S. initial jobless claims at 12:30 pm GMT
U.S. Chicago PMI at 1:45 pm GMT
U.S. FOMC Chairman Powell to testify in DC at 2:00 pm GMT

If you’re not familiar with the forex market’s main trading sessions, check out our Forex Market Hours tool.

What to Watch: NZD/JPY

NZD/JPY 4-hour Forex Chart
NZD/JPY 4-hour Forex Chart

We have a couple of mid-tier economic releases due in the next few hours but markets will likely extend Asia and European markets’ pro-dollar, slightly risk-averse themes until we see a new catalyst.

If you’ve just tuned in, traders have bought the dollar like there’s no tomorrow because the Fed’s tapering plans make the safe-haven even more attractive amidst headlines of energy crises, manufacturing slowdowns, and general hiccups in the global economic recovery.

Will we see another round of risk aversion today? I’l be looking at NZD/JPY because it’s near a mid-range level on the 4-hour time frame.

The biggest potential catalyst is FOMC Chairman Powell’s testimony in DC. Traders are waiting for more clues about the Fed’s tapering timeline and its biases on the current inflation numbers.

If Powell’s testimony scheduled later today causes risk-taking in the markets, then NZD/JPY could get some love from its mid-range support.

Traders could remember that New Zealand just printed better-than-expected mid-tier reports today and see that NZD/JPY has an oversold Stochastic signal and a bullish divergence on the 4-hour chart.

If risk aversion grips the market for another day, though, then I’ll be ready for a clear break below the mid-range support. 75.25 would be a good longer-term target but I won’t say no to inflection points like 75.50.