Last week’s short-term trade worked out for a while, but it had trouble getting momentum. Think the dollar’s selloff will take a chill pill over the next couple of days?
As you can see, USD/JPY bears are having trouble getting momentum below the 108.75 area, which lines up with a long-term range support that hasn’t been broken since November 2016.
What’s interesting about the chart is that there’s also a bullish divergence forming right around the time when daily candles are sporting wicks indicative of a strong support.
But that’s just the technicals. Fundamentally, not a lot has changed for the dollar’s fundamental picture compared to last year.
Traders are still flocking to higher-yielding currencies and they’re still waiting for fresh catalyst to push the Greenback higher. And then there’s the BOJ, which just raised its bond-purchasing game in reaction to the increase in JGB yields.
Will today’s FOMC statement change the picture for the dollar? While no one is expecting changes from the central bank, others believe that Janet Yellen’s last policy meeting will likely end on a positive note. And whether or not they upgrade their forecasts, any positive sentiment from the Fed could inspire traders to take profits from their dollar shorts.
Right now USD/JPY is still around the consolidation, so it could still go in either direction. Over the next couple of days I’ll keep my eyes peeled for any market-moving reports that could inspire a retracement, downside breakout, or a reversal.
What about you? Do you think USD/JPY will finally see bullish momentum in the next trading sessions? Or will more bears step in like it did with USD/CHF’s long-term range and drag the pair to its lowest levels since 2016?
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