Currencies & Forex

Forex Update: USD/JPY Closing In On 50-Day Moving Average

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The USD/JPY is converging on its 50-day moving average, which is currently at 110.25. Earlier today, it faded resistance @ 109.64 and two days prior to that, it advanced to as high as 109.55 before pulling back to as low as 108.46. In a previous post, I noted that @ 109.55 was a key intraday resistance level. (See technical analysis chart below.)

Upcoming economic data that might be just enough to nudge the forex pair above resistance at its 50-day moving average is Japan’s GDP report for Q1-2016, which is to be released May-17-2016 @ 7:50PM (ET). Consensus estimates have Japan improving to +0.1% vs. the previous report @ -0.3%. Anything short of this will likely be detrimental to Yen bulls. Besides, a weaker report would only aid its cause for currency intervention or further monetary stimulus when it hosts this month’s upcoming G-7 meeting to be held during May 26-27, 2016.

Also heavily influencing the direction of the Yen will be market interpretations derived from the May 18, 2016 release of minutes from the last FOMC¬†policy meeting, which was held on April 27, 2016 . Traders and investors will be mining the report for new insights on the Fed’s economic outlook and a shift in its bias towards raising rates. On one hand, the Fed likes to highlight the economic strength and resiliency of the U.S. economy, while the other raises a sign of caution and reminds us that it is still chasing the elusive butterfly target of 2% inflation or the risks of ¬†weakness spilling over from Asia and Europe. Stay tuned. It’s the longest running drama in fiscal theatre.

Meanwhile, the market condition for the USD/JPY continues to evolve. As mentioned before, its 4-hour time frame indicates a bearish channel, but earlier in overnight trading, it cleared resistance at its 200-bar moving average and this has now become a level of support as the USD/JPY consolidate gains since its bullish reversal off the bottom @ 105.546 on May 2, 2016.


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