USDJPY rebound taking shape

Countertrend reversal in play: Chart

U Turn 1

The US Dollar was under pressure against most of its major pairs on Wednesday with the exception of the JPY and NZD. On the US economic data front, the Mortgage Bankers Association's Mortgage Applications rose 4.6% for the week ending October 2nd, compared to -4.8% a week earlier. Finally, the Federal Open Market Committee's (FOMC) Meeting Minutes stated that on net, financial conditions have eased since the last Meeting. As equity prices have risen and the dollar continuing to depreciate, the Fed believes that aggressive monetary and fiscal policy are needed to keep the recovery going strong as market participants still see significant risks ahead.  

On Thursday, Initial Jobless Claims for the week ending October 3rd are expected to fall to 820K, from 837K in the week before. Finally, Continuing Claims for the week ending September 26th are anticipated to decline to 11,400K, from 11,767K in the prior week. 

The Euro was bullish against most of its major pairs with the exception of the AUD. In Europe, the German Federal Statistical Office has posted August industrial production at -0.2% (vs +1.5% on month expected).

The Australian dollar traded higher against all of its major pairs.

Looking at active pairs, the USD/JPY jumped 40 pips in Wednesday's trading making it one of the best performers against the majors. The pair remains inside a long term bearish trend channel however a reversal pattern has taken shape inside the channel. A bullish falling wedge reversal pattern has been confirmed. Look for a continuation of the rebound towards the 106.96 resistance area to see how the declining trend line acts as resistance. A break below 104.965 would call for a resumption of the main bearish trend channel. 

Source: GAIN Capital, TradingView

Happy Trading

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.