USD/JPY Remains Capped by Former Support Ahead of FOMC, BoJ Meeting

Talking Points:

- USD/JPY Struggles to Push Above Former Support; Will the BoJ Ease Policy Further?

- EUR/USD Vulnerable on Dismal ECB Bank Stress Test; Lower-High in Place?

- USDOLLAR Breakout in Focus Ahead of FOMC Meeting; Forward-Guidance to Dictate Market Reaction.

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USD/JPY

Chart - Created Using FXCM Marketscope 2.0

• Upward trending channel favors topside targets for USD/JPY, but may face a short-term pullback as it comes up against trendline resistance.
• Still need to see a break of the bearish momentum on the Relative Strength Index (RSI) to favor a higher-high for USD/JPY, especially as it struggles to push & close above former support around 108.20 (61.8% retracement) to 108.30 (1.618% expansion).
• Key support remains around 105.10 (38.2% expansion) to 105.20 (50.0% expansion).

EUR/USD

• Even though Bloomberg News reports 25 of the 130 commercial banks have failed the European Central Bank’s (ECB) stress test, EUR/USD remains bid as only 10 are expected to face a capital shortfall.
• Despite the headlines, the results may put increased pressure on the ECB to implement more non-standard measures; Euro-Zone Consumer Price Index (CPI) will be close watched next week as the core rate of inflation is projected to hold steady at an annualized 0.8%.
• Despite the recent volatility in the DailyFX Speculative Sentiment Index (SSI), retail-crowd is net-long EUR/USD going into the last full week of October, with the ratio standing at +1.14.

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Read More:

A Look At EUR/USD Before Stress Tests & The FOMC

The Weekly Volume Report: USD/JPY Rallies, Turnover Doesn’t

USDOLLAR(Ticker: USDollar):

Chart - Created Using FXCM Marketscope 2.0

• The bullish breakout in the Dow Jones-FXCM U.S. Dollar Index remains favored ahead of the Federal Open Market Committee’s (FOMC) October 29 meeting as the central bank is widely expected to halt its asset-purchase program; however, the forward-guidance for monetary policy may have the greater impact in driving the USDOLLAR as market participants largely look for the first rate hike in 2015.
• The advance 3Q GDP report will also be in focus as the U.S. economy is expected to grow an annualized 3.1% after expanding 4.6% during the three-months through June.
• Looks as though a near-term bottom is in place given the string of closes above 10,950 (38.2% retracement), with 11,120 (1.618) to 11,138 (0.618%) in focus going into the month-end.

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--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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