Talking Points:
- EURUSD rejected at pre-ECB November swing highs.
- AUDUSD remains most stubborn of USD-pairs.
- See the 'high' importance events on the DailyFX Economic Calendar.
After Friday's inverted hammer at yearly highs, the USDOLLAR Index looked a bit toppish. However, there has been absolutely zero follow through today. A brief dip lower at the start of the session was quickly rebuffed by traders in Asia and Europe, and as it stands, the greenback is finding support between its 8- and 13-EMAs in the form of a daily hammer - a bullish candlestick.
The biggest driver overnight in what should be a relatively quieter week of event risk was the significant miss on the Q3'14 Japanese GDP figure. Is Abenomics working? It doesn't appear so after the meager April sales tax hike knocked back spending from an already purchasing-power-sapped consumer.
In hindsight, the Bank of Japan's latest easing measures (read BoJ Jumps the Shark as JPY Implodes on Surprise Easing) look even more desperate as it has become inherently clear that fiscal reform in Japan is dead.
Good luck trying to raise taxes in the future when the two most recent ones in mind have sparked discouraging outcomes - the April 2014 sales tax hike and its impact on Q2' and Q3'14 GDP and the sales tax hike of 1997, which helped precipitate the Asian financial crisis (a concern we first mentioned back in August 2013, when it became clear Abe was moving towards more fiscal tightening).
The big question now for traders: are we reaching the Japanese end game?
Read more: Euro’s Obstacles Starting to Wane but Reprieve Likely Temporary
--- Written by Christopher Vecchio, Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
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