EUR/USD Possible Bullish Counter Trend Move from 1.1590

>> The EUR/USD formed a possible counter trend pattern that has been spurred by London Open bullish momentum .<<

Green triangles present the Asian range that has been broken as shown in the LOA (London Open Advanced) module. At this point we see that the price is struggling to break to the upside. I expect a breakout towards 1.1650 today and the scenario is valid as long as 1.1555 stays strong. EUR/USD possible counter trend move is on its way even above 1.1650 towards 1.1740.

EUR/USD Possible Bullish Counter Trend Move from 1.1590

AUD/USD and NZD/USD Fundamental Daily Forecast – Higher U.S. Yields Continue to Pressure Aussie, Kiwi

The Australian and New Zealand Dollars are trading lower against the U.S. Dollar early Monday. Both currencies are still trading inside Friday’s range, which suggests investor indecision and impending volatility. Increased demand for higher-yielding assets is underpinning the currencies, but higher U.S. Treasury yields are capping gains by making the U.S. Dollar a more attractive investment.

At 0633 GMT, the AUD/USD is trading .7212, down 0.0005 or -0.08% and the NZD/USD is at .6611, down 0.0008 or -0.12%.

Over the weekend, China released its Manufacturing PMI. It came in at 50.8, below the 51.2 forecast. It also represented a decline from the previously reported 51.3, Non-Manufacturing PMI, however, increased to 54.9 from 54.2. This was better than the 54.1 forecast. Caixin Manufacturing Pmi was 50.0, down from 50.6 and below the 50.5 forecast. A reading of below 50.0 indicates contraction.

Australia is on bank holiday today so volume and volatility are a little light. Nonetheless, there were reports. AIG Manufacturing Index was 59.0, up from 56.7. The MI Inflation Gauge was 0.3%, up from 0.1%.

Forecast

The AUD/USD and NZD/USD are likely to remain under pressure today as long as the focus remains on expectations of higher U.S. interest rates. Driving the price action at this time is the widening of the spread between U.S. Government bond yields and Australian and New Zealand Government bond yields. Investors are leaving the Aussie and Kiwi and chasing the higher U.S. yields.

Furthermore, we could see additional pressure on the Australian Dollar because of potentially bearish developments in the Australian financial sector. An interim report by Australia’s Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, revealed instances of bribery, fraud, fee-gouging and board-level deception within the sector.

Later today, investors will get the opportunity to react to a slew of U.S. economic data including Final Manufacturing PMI, Construction Spending and Total Vehicle Sales. The major report is the ISM Manufacturing PMI. It is expected to come in at 60.1, slightly below the previously reported 61.3.

Federal Open Market Committee Member Bostic is also scheduled to speak. Recently, Raphael Bostic of the Atlanta Fed expressed worries about the potential for an inverted yield curve – short term rates higher than long-term rates – which could be a signal for an upcoming downturn as the inversion has preceded recessions in recent history.

USD/JPY Fundamental Daily Forecast – NAFTA Deal Supporting Increased Demand for Risky Assets

The Dollar/Yen is inching higher early Monday, continuing last week’s rally that was fueled by a quarter point rate hike by the U.S. Federal Reserve, expectations of further rate hikes by the central bank and a bullish outlook for the U.S. economy.

What it all comes down to is the widening interest differential between U.S. Government bonds and Japanese Government bonds. This is being fueled by the divergence in the monetary policies of the hawkish U.S. Federal Reserve and the dovish Bank of Japan.

For example, just a couple of days after the Fed made its move, the BOJ Summary of Opinions showed that policymakers were still debating how to stimulate the economy.

In other news, earlier today in Japan, the Tankan Manufacturing Index came in at 19, below the 22 forecast. The Tankan Non-Manufacturing index was 22, below the 23 forecast. Final Manufacturing PMI was 52.5, also missing the 52.9 forecast.

The key quarterly Tankan surveys by the BOJ showed that sentiment among large manufacturers dipped last month as worries grew about global trade tensions. Furthermore, there may be a trend developing because today’s data market the third straight quarter of decline.

The service sector survey fell in part due to string of natural disasters this summer including massive flooding caused by torrential rain in western Japan and Typhoon Jebi in early September.

Forecast

At 0614 GMT, the USD/JPY is trading 113.929, up 0.256 or +0.22%. This puts the Forex pair on the strong side of the December 12, 2017 top at 113.745. If the technical momentum continues then buyers may make a run at the November 6, 2017 top at 114.728.

In addition to a hawkish outlook for U.S. interest rates, the Dollar/Yen is also being supported by increased demand for higher-risk assets. The major U.S. stock indexes are trading higher early Monday as the U.S. and Canada announced that they had reached a deal to replace the North American Free Trade Agreement (NAFTA).

The Japanese Yen tends to weaken during periods of increased demand for stocks because of the carry trade. Investors take cheap loans from Japanese banks and convert Yen into Dollars to invest in U.S. stock markets.

Later today, investors will get the opportunity to react to a slew of U.S. economic data including Final Manufacturing PMI, Construction Spending and Total Vehicle Sales. The major report is the ISM Manufacturing PMI. It is expected to come in at 60.1, slightly below the previously reported 61.3.

Federal Open Market Committee Member Bostic is also scheduled to speak.

AUD/USD Forex Technical Analysis – Primary Downside Target .7200 to .7172

The AUD/USD closed higher on Friday as investors took profits and adjusted positions following a steep two-day setback. The selling pressure was essentially fueled by the widening of the interest rate differential between U.S. Government bonds and Australian Government bonds. Fueling the move in interest rates was the divergence in the monetary policies between the hawkish U.S. Federal Reserve and the dovish Reserve Bank of Australia (RBA).

AUDUSD
Daily AUD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .7314 will change the main trend to up. A move through .7202 will indicate the selling is getting stronger. This could fuel a break into the next swing bottom at .7142.

The main range is .7085 to .7314. Its retracement zone at .7200 to .7172 is the primary downside target. Aggressive counter-trend buyers could step in on a test of this zone in an effort to form a secondary higher bottom.

If a short-term range forms between .7314 and .7202 then look for a possible rally into its retracement zone at .7258 to .7271. Since the trend is down, sellers could come in on a test of this zone.

The major retracement zone resistance is .7285 to .7332. This zone stopped the rally at .7314 on September 26.

Daily Swing Chart Technical Forecast

Based on Friday’s price action and the close at .7217, the direction of the AUD/USD on Monday is likely to be determined by trader reaction to the main 50% level at .7200.

A sustained move over .7200 will indicate the presence of buyers. If this move can create enough upside momentum, we could see a rally into the short-term retracement zone at .7258 to .7271. Look for sellers to re-emerge on a test of this zone.

Taking out .7200 and sustaining the move will signal the presence of sellers. If the selling is strong enough then look for a possible spike into the Fibonacci level at .7172. This level could attract some buyers, but it is also a trigger point for an acceleration to the downside with .7142 the next likely downside target.

EUR/USD Forex Technical Analysis – Getting Close to Testing Key Retracement Zone at 1.1559 to 1.1498

The EUR/USD finished lower on Friday, capping a very bearish week. Early in the week, the Forex pair rallied on hawkish comments about inflation from European Central Bank President Mario Draghi. However, this rally stalled when Draghi said this news wouldn’t change the ECB’s plan to begin raising rates after the summer of 2019.

EURUSD
Daily EUR/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending lower since the formation of a closing price reversal top at 1.1816 on September 24. A trade through this top will negate the chart pattern and signal a resumption of the uptrend.

The main trend will change to down on a trade through 1.1526.

The minor trend is down. This confirms the shift in momentum to down.

The main range is 1.1301 to 1.1816. Its retracement zone at 1.1559 is the primary downside target. The main bottom is also inside this zone. Since the main trend is up, watch for buyers to show up on a test of this zone.

If a new short-term range forms between 1.1816 and 1.1570 then watch for a possible rebound rally into its retracement zone at 1.1693 to 1.1722.

Daily Swing Chart Technical Forecast

Based on Friday’s close at 1.1604 and the price action, the direction of the EUR/USD on Monday is likely to be determined by trader reaction to the 50% level at 1.1559.

A sustained move over 1.1559 will indicate the presence of buyers. If this move can generate enough upside momentum then look for the rally to possibly extend into the short-term retracement zone at 1.1693 to 1.1722. Aggressive counter-trend sellers could come in on a test of this zone.

A sustained move under 1.1559 will signal the presence of sellers. This could spike the market into the main bottom at 1.1526. Taking out this bottom will change the main trend to down. This could extend the selling into the Fibonacci level at 1.1498.

We could see a technical bounce on the first test of 1.1498. If it fails then look for a potential acceleration to the downside under this level. The daily chart indicates there is plenty of room to the downside with 1.1301 the next likely downside target.

USD/JPY Forex Technical Analysis – Strong Momentum Over 113.745 Can Spike Dollar/Yen to 114.728

The USD/JPY settled higher on Friday and in a position to continue to breakout to the upside. The catalyst behind the rally is a widening interest rate differential between U.S. Government bonds and Japanese Government bonds. Essentially, it is the divergence in monetary policies between the hawkish U.S. Federal Reserve and the dovish bank of Japan that is driving the price action.

USDJPY
Daily USD/JPY

Daily Technical Analysis

The main trend is up according to the daily swing chart. A trade through last week’s high at 113.710 will signal a resumption of the uptrend. The main trend will change to down on a trade through 112.555.

Today’s price action will be controlled by momentum. Currently the upside momentum is strong with buyers easily taking out previous resistance areas. If it continues then the rallies should get stronger, however, volatility will also increase. The only pattern that could stop this rally is a closing price reversal top. This pattern usually signals a shift in momentum to down.

Daily Technical Forecast

Based on Friday’s close at 113.685 and the upside momentum into the close, the direction of the USD/JPY on Monday is likely to be determined by trader reaction to the December 12, 2017 main top at 113.745.

Taking out 113.745 with conviction will indicate the buying is getting stronger. This could trigger an acceleration to the upside with the next target an uptrending Gann angle at 114.379. Crossing to the strong side of this angle will put the USD/JPY in an extremely bullish position with the next target the November 6, 2017 main top at 114.728.

The inability to overtake and sustain a rally over 113.745 will signal the presence of sellers. The first downside target is a steep short-term uptrending Gann angle at 113.555. Since the trend is up, we could see buyers step in on the first test of this angle.

If 113.555 fails as support then look for a steep drop into the next uptrending Gann angle at 113.055. Once again buyers could step in on a test of this angle. If it fails then the selling will rotate into the next potential support angle at 112.805. This is the last Gann angle support before the 112.555 main bottom.

NZD/USD Forex Technical Analysis – Buyers May Try to Form Secondary Higher Bottom at .6600 to .6576

The NZD/USD finished slightly better on Friday with the move likely attributed to profit-taking and position-squaring after a steep sell-off throughout the week and ahead of the weekend. Despite the bearish fundamentals, the Forex pair is in a positon to test a key support area that should determine the next major move.

NZDUSD
Daily NZD/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of the closing price reversal top on September 21. A trade through .6700 will negate the closing price and signal a resumption of the uptrend. The main trend will change to down on a trade through .6500.

The minor trend is down. This move confirms the shift in momentum to down.

The main range is .6851 to .6500. Its retracement zone at .6676 to .6717 is resistance. This zone stopped the rally at .6700.

The short-term range is .6500 to .6700. Its retracement zone at .6600 to .6576 is the primary downside target. The 50% or upper level at .6600 provided support on Friday.

Daily Swing Chart Technical Forecast

Based on Friday’s price action and the close at .6619, the direction of the NZD/USD on Monday is likely to be determined by trader reaction to the 50% level at .6600.

Bullish Scenario

A sustained move over .6600 will indicate the presence of buyers. This could trigger a rally into .6649. Watch for sellers on the first test of this level. Overcoming it could trigger a further rally into .6676.

Bearish Scenario

A sustained move under .6600 will signal the presence of sellers. This could trigger a quick break into .6576. If this fails then look for the selling pressure to increase. The daily chart opens up under this Fibonacci level with targets at .6538 and .6500.

Buyers are going to try to form a secondary higher bottom at .6600 to .6576. Sellers are going to try to take out this zone.

USD/JPY Fundamental Weekly Forecast – Price Action Indicates Fed is in Driver’s Seat

The divergence between the monetary policies of the hawkish U.S. Federal Reserve and the dovish Bank of Japan helped drive the Dollar/Yen to its highest level since December 21. The widely expected Fed rate hike last week also widened the spread between U.S. Government bond yields and Japanese Government bond yields, making the dollar a more attractive investment.

In other news, it was revealed in the Bank of Japan summary of opinions that policymakers debated in September the potential of making further tweaks to their massive stimulus program with one member seeing room to make monetary policy more flexible. Another BOJ policymaker called on the need to deepen debate within the nine-member board on the time frame for maintaining the central bank’s ultra-loose policy, the summary showed.

For the week, the USD/JPY settled at 113.685, up 1.137 or +1.01%.

Monetary Policy Divergence Continues

The Hawkish Fed

The U.S. Federal Reserve increased the target for the bank’s benchmark by 0.25%, to a range of 2%-2.25%. A majority of Federal Open Market Committee members also said they expect another rise before the end of the year. This was also the bank’s eighth rate hike since 2015, continuing its policy of gradual rate hikes.

FOMC members led by Chairman Jerome Powell said the economy is strong enough that aggressive stimulus is no longer necessary. This confidence was shown by the Fed ending its description of its policy as “accommodative”.

Powell also said the rate hike reflected the Fed’s confidence in the U.S. economy, describing it as a “particularly bright moment”.

Fed officials now expect the U.S. economy to grow by 3.1% this year, faster than the 2.8% forecast in March, according to the projections released after the meeting. Their predictions for inflation remained unchanged at around 2%.

The FOMC forecasts showed Fed officials expect about three rate hikes in 2019 and one more in 2020, which would lift the central bank’s important Fed funds rate to about 3.4% that year.

The Dovish BOJ

By contrast as revealed in Friday’s Bank of Japan Summary of Opinions, policy board members of the BOJ are becoming increasing concerned about downside risks to the economy and prices, including the potential impact of trade frictions.

“With regard to the risk balance in the global economy, there likely remain growing downside risks stemming from trade friction between such economies as the United States and China as well as from fluctuations in financial markets,” one of the BOJ’s nine policy board members said, according to the summary of the board’s meeting held on September 18-19.

The BOJ stood pat on policy at the September meeting after making a number of tweaks in July to prepare for a longer-than-expected fight to lift inflation, which has yet to reach the bank’s 2% target. It also reiterated that the bank will allow the 10-year Japanese government bond yield to move in a wider range in a bid to revive JGB trading.

Forecast

The divergence in the monetary policies of the Fed and BOJ can’t be any clearer. This is why the USD/JPY is bullish. What stands out after last week’s performance is that the Fed is ready to raise rates again in December while the BOJ is still looking at downside risks to the economy.

There is economic data from Japan this week, but if the BOJ is still concerned about the strength of the economy then I don’t think investors are going to put much faith in the numbers. This likely means we’ll see a muted reaction to the reports.

Early Monday, the Tankan Large Manufacturers Index is expected to come in at 22, up slightly from 21. The next report is Consumer Confidence. It is forecast at 43.4, up slightly from 43.3. Call me when it gets over 50. The rest of the week is peppered with minor reports on household spending, foreign exchange reserves and average cash earnings. Medium reports include leading economic index and coincident index.

The chart pattern indicates the market is being driven by strong technical momentum. It seems the higher the market goes, the faster it moves. After trading in an elongated range for close to a year, investors seem to finally be taking the Fed seriously as it moves more aggressively to reduce its balance sheet.

The weekly chart indicates that a move over 113.745 this week could attract enough buyers to drive the USD/JPY to at least 114.728.

AUD/USD and NZD/USD Fundamental Weekly Forecast – Don’t Expect Any Surprises from the RBA

The Australian and New Zealand Dollars were pressured all week by rising U.S. interest rates, solid U.S. economic data and lower demand for risky assets. With the Fed raising rates for a third time this year and signaling more to come, the spread between U.S. interest rates and Australian and New Zealand interest rates continued widen, making the U.S. Dollar a more attractive investment.

Last week, the AUD/USD settled at .7217, down 0.0071 or -0.97% and the NZD/USD finished at .6619, down 0.0061 or -0.91%.

In other news, the Reserve Bank of New Zealand (RBNZ) kept its official cash rate at a record low of 1.75 percent. RBNZ Governor Adrian Orr said while there were welcome early signs inflation was rising, downside risks to growth remained, particularly “trade tensions” between some major global economies.

On September 26, the U.S. Federal Reserve increased the target for the bank’s benchmark by 0.25%, to a range of 2%-2.25%. A majority of Federal Open Market Committee members also said they expect another rise before the end of the year. This was also the bank’s eighth rate hike since 2015, continuing its policy of gradual rate hikes.

FOMC members led by Chairman Jerome Powell said the economy is strong enough that aggressive stimulus is no longer necessary. This confidence was shown by the Fed ending its description of its policy as “accommodative”.

In economic news, Final Q2 US. GDP rose 4.2%. Core Durable Goods Orders came in at 0.1%. Durable Goods Orders rose 4.5%. The Core PCE Price Index was flat, but Personal Spending rose 0.3%. The Conference Board’s Consumer Confidence hit an 18-year high at 138.4. University of Michigan’s Consumer Sentiment, however, came in slightly below expectations at 100.1.

With the exception of the NASDAQ Composite, the major U.S. stock indexes finished lower last week. This helped drive down demand for the risky Aussie and Kiwi. Furthermore, problems with the Italian budget drove the Euro lower. This also drove down demand for higher-yielding currencies.

Forecast

Economic news that could influence the U.S. Dollar and the Aussie and Kiwi this week are U.S. ISM Manufacturing PMI, ISM Non-Manufacturing PMI, and the Balance of Trade.

Additionally, investors will get the opportunity to react to the September Non-Farm Payrolls report. The headline number is expected to show the economy added 185K jobs last month. Average Hourly Earnings are expected to have risen 0.3% and the Unemployment Rate is expected to dip to 3.8%.

The dollar will also continue to be influenced by Treasury yields and worries over Italy.

Data is light out of New Zealand, but in Australia, investors will be watching the latest Reserve Bank of Australia interest rate decision. The RBA is widely expected to leave rates unchanged at 1.50 percent.

The other major report is Balance of Trade. It is expected to come in at A$1.4 Billion, slightly below the last read of A$1.551 Billion.

The economic data could cause volatile short-term swings, however, the dominant bearish trend will continue to be controlled by U.S. Treasury yields and demand for risky assets.

AUD/USD Forex Technical Analysis – Sustained Move Under .7200 Will Pressure All Week

The Australian Dollar started the week in a strong position, but sellers stopped the counter-trend rally after the Fed raised rates and hinted at another rate hike in December. The widening interest rate differential between U.S. Government bond yields and Australian Government bond yields also made the U.S. Dollar a more attractive asset. Essentially, the direction of the currency was dictated by the divergence in monetary policy between the hawkish U.S. Federal Reserve and the dovish Reserve Bank of Australia.

For the week, the AUD/USD settled at .7217, down 0.0071 or -0.97%.

AUDUSD
Weekly AUD/USD

Weekly Technical Analysis

The main trend is down according to the weekly swing chart. A trade through .7484 will change the main trend to up. A move through .7085 will signal a resumption of the downtrend.

The minor trend is also down. Taking out .7382 will change the minor trend to up. This will also shift momentum to the upside.

The main range is .7484 to .7085. Its retracement zone at .7285 to .7332 is resistance. This zone stopped the rally at .7314 last week.

The minor range is .7085 to .7314. Its 50% level or pivot at .7200 is support. Last week’s selling stopped at .7202, just slightly above this level.

AUDUSD
Weekly AUD/USD (Close-Up)

Weekly Technical Forecast

Based on last week’s close at .7217, the direction of the AUD/USD this week is likely to be determined by trader reaction to the pivot at .7200.

Bullish Scenario

A sustained move over .7200 will indicate the presence of counter-trend buyers. Crossing to the strong side of a short-term uptrending Gann angle at .7205 will also indicate buyers.

If this move creates enough upside momentum then look for a test of the downtrending Gann angle at .7244. Overtaking this angle will indicate the buying is getting stronger with the 50% level at .7285 the next likely target. Look for sellers on the first test of this level.

Overtaking .7285 could trigger a further rally into last week’s high at .7314, followed by a Fibonacci level at .7332, and downtrending Gann angles at .7337 and .7364.

The trigger point for an acceleration to the upside is .7364.

Bearish Scenario

A sustained move under .7200 will signal the presence of sellers. This will also put the AUD/USD on the weak side of an uptrending Gann angle at .7205. If the market breaks sharply then look for a possible test of a pair of uptrending Gann angles at .7145 and .7115. The latter is the last potential support angle before the .7085 main bottom.

Look for a break into .7004 to .6997 if .7085 fails as support. Crossing to the weak side of .6997 will put the AUD/USD in a bearish position.

USD/JPY Forex Technical Analysis – Sustained Move Over 113.745 Targets 114.728

The Dollar/Yen closed sharply higher last week and in a position to continue to drive higher this week. The catalyst behind the bullish price action is the divergence in monetary policies between the hawkish U.S. Federal Reserve and the dovish Bank of Japan. The upside momentum was fueled last week when the Fed raised rates a quarter-point and signaled another rate hike for December. Strong U.S. economic data and an easing of concerns over trade disputes also supported the rally.

For the week, the USD/JPY settled at 113.685, up 1.137 or +1.01%.

USDJPY
Weekly USD/JPY

Weekly Technical Analysis

The main trend is up according to the weekly swing chart. The uptrend was reaffirmed when buyers took out the previous main top at 113.210. The uptrend is safe for now with the last main bottom coming in at 109.770. However, there is always the danger of a closing price reversal top. This won’t change the main trend to down, but it will indicate the selling is greater than the buying at current price levels. This could also trigger a 2 to 3 week correction.

Weekly Technical Forecast

Based on last week’s price action and strong close, the direction of the USD/JPY this week is likely to be determined by trader reaction to the former top at 113.745.

A sustained move over 113.745 will indicate the buying is getting stronger. If this creates enough upside momentum then look for the rally to extend into the next main top at 114.728.

A sustained move under 113.745 will signal the presence of sellers. The first target is the former top at 113.210. Crossing below this former top will indicate the selling is getting stronger. The best downside target is an uptrending Gann angle at 112.770. This angle, moving up at a rate of .50 per week, has been guiding the market higher since the 109.770 bottom, the week-ending August 24.

The fundamentals are bullish at this time. The momentum is strong and the targets have been defined. It seems the only thing that could derail the rally at this time is a drop in demand for higher-risk assets, or trouble with the emerging markets. These issues could be raised by renewed concerns over the trade disputes. In this case, the Dollar/Yen could weaken due to flight-to-safety buying into the Japanese Yen.

NZD/USD Forex Technical Analysis – Pivot at .6614 Will Set the Tone This Week

The New Zealand Dollar closed lower last week, pressured by expectations of rising U.S. interest rates, a drop in demand for risky assets and weak domestic data. A divergence between the monetary policies of the hawkish U.S. Federal Reserve and the dovish Reserve Bank of New Zealand is primarily driving the bearish price action. The Fed raised rates last week while the RBNZ showed no signs of changing policy.

For the week, the NZD/USD settled at .6619, down 0.0061 or -0.91%.

NZDUSD
Weekly NZD/USD

Weekly Technical Analysis

The main trend is down according to the weekly swing chart. A trade through .6727 will change the main trend to up. A move through .6500 will signal a resumption of the downtrend. Last week, traders produced an inside move. This tends to indicate investor indecision and impending volatility. However, in this case, I think it indicates a shift in momentum back to down after two weeks of higher closes.

The short-term range is .6727 to .6500. Its 50% level or pivot is .6613.

The main range is .7061 to .6500. If the trend changes to up then its retracement zone at .6781 to .6847 will become the primary upside target.

Weekly Technical Forecast

Based on last week’s close at .6619, the direction of the NZD/USD this week is likely to be determined by trader reaction to the short-term pivot at .6614.

A sustained move over .6614 will signal the presence of buyers. The first target is a downtrending Gann angle at .6627. Overtaking this angle with conviction will indicate the buying is getting stronger. The next target angle is .6702. This angle is the most important resistance. It has stopped the rally the last two weeks.

Taking out .6701 could trigger an acceleration into .6721 and .6727.

A sustained move under .6614 will signal the presence of sellers. The first target is a downtrending Gann angle at .6727. Crossing to the weak side of this angle will put the NZD/USD in a bearish position with .6500 the next target.

The Forex pair is wide open under .6500 with the next major target coming in at .6398.

USD/JPY Fundamental Daily Forecast – Investors Chasing Higher-Yielding U.S. Dollar

After showing early signs of topping due to flight-to-safety buying of the Japanese Yen on Friday, the Dollar/Yen recovered to close near its highs for the week. The Forex pair surged to 113.71, putting it slightly below the December 12 top at 113.745. The catalysts behind the rally were rising U.S. interest rates and solid U.S. economic data.

The USD/JPY settled on Friday at 113.685, up 0.279 or +0.25%.

Upside momentum is strong as demonstrated by Thursday and Friday’s quick recovery from a technical closing price reversal top on Wednesday. Not only is the rally being fueled by buy stops and short-covering, but aggressive investors have also showed that they are willing to buy strength now that the Fed has laid out its plans for further rate hikes. Given the Forex pair’s current position and the strength of the buying, it doesn’t look like it’s going to take much to drive prices to the top at 114.728 or the cluster of tops slightly above 115.000.

The price action is being primarily driven by the divergence in monetary policies between the hawkish U.S. Federal Reserve and the dovish Bank of Japan.

Earlier in the week, the U.S. Federal Reserve increased the target for the bank’s benchmark by 0.25%, to a range of 2%-2.25%. A majority of Federal Open Market Committee members also said they expect another rise before the end of the year. This was also the bank’s eighth rate hike since 2015, continuing its policy of gradual rate hikes.

FOMC members led by Chairman Jerome Powell said the economy is strong enough that aggressive stimulus is no longer necessary. This confidence was shown by the Fed ending its description of its policy as “accommodative”.

Powell also said the rate hike reflected the Fed’s confidence in the U.S. economy, describing it as a “particularly bright moment”.

Fed officials now expect the U.S. economy to grow by 3.1% this year, faster than the 2.8% forecast in March, according to the projections released after the meeting. Their predictions for inflation remained unchanged at around 2%.

The FOMC forecasts showed Fed officials expect about three rate hikes in 2019 and one more in 2020, which would lift the central bank’s important Fed funds rate to about 3.4% that year.

By comparison as revealed in Friday’s Bank of Japan Summary of Opinions, policy board members of the BOJ are becoming increasing concerned about downside risks to the economy and prices, including the potential impact of trade frictions.

“With regard to the risk balance in the global economy, there likely remain growing downside risks stemming from trade friction between such economies as the United States and China as well as from fluctuations in financial markets,” one of the BOJ’s nine policy board members said, according to the summary of the board’s meeting held on September 18-19.

The BOJ stood pat on policy at the September meeting after making a number of tweaks in July to prepare for a longer-than-expected fight to lift inflation, which has yet to reach the bank’s 2% target. It also reiterated that the bank will allow the 10-year Japanese government bond yield to move in a wider range in a bid to revive JGB trading.

The divergence in policies can’t be any clearer. This is why the USD/JPY is bullish.

AUD/USD and NZD/USD Fundamental Daily Forecast – Widening Interest Rate Differential Sending Investors into US Dollar

The Australian and New Zealand Dollars closed slightly higher on Friday as emerging markets rebounded after several days of selling pressure. Technically oversold conditions may have also played a role in the rebound as well as profit-taking and positon-squaring ahead of the week-end.

Early in the session, traders showed little reaction to the New Zealand Building Consents report which rose 7.8%. Buyers may have been spooked by the downward revision to the previous month’s report. In Australia, Private Sector Credit rose 0.5%, better than the 0.4% forecast and previous read.

The AUD/USD finished the session at .7217, up 0.0012 or +0.17% and the NZD/USD closed at .6619, up 0.0006 or +0.09%.

Aussie and Kiwi traders were primarily tracking the rebound in emerging market financial assets throughout the session. Traders reacted to Chinese equity markets with the Shanghai Composite ending its trading session up by more than 1%. Strength in China-sensitive commodities, such as industrial metals, also helped give the currencies a boost. An early session rally in silver and a late session move by gold were also supportive. Given Australia’s significant trading relationship with China, the Aussie tends to broadly track developments in Chinese financial markets.

Little Reaction to U.S. Economic Data

Traders for the most part showed little reaction to U.S. economic data. The Personal Consumption Expenditures (PCE) index excluding the volatile food and energy components was unchanged in August after rising 0.2 percent in July.

The Commerce Department said on Friday consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.3 percent last month after an unrevised 0.4 percent gain in July. August’s increase in consumer spending was in line with economists’ expectations.

In August, personal income rose 0.3 percent after increasing by the same margin in July. Wages jumped 0.5 percent. The saving rate was unchanged at 6.6 percent last month.

Chicago PMI came in lower than expected at 60.4. The market had priced in a reading of 62.3

U.S. consumer sentiment came in just under expectations in the final reading of September. Nonetheless, the index remained near all-time high levels.

The University of Michigan’s monthly survey of consumers hit 100.1 in the final reading of September, below the 100.8 expected from economists. Sentiment among consumers rose from August’s final reading, when sentiment hit 96.2.

Despite the one-day reprieve, the outlook for the AUD/USD and NZD/USD remains bearish. The divergence between the monetary policies of the hawkish U.S. Federal Reserve and the dovish RBA and RBNZ is making the U.S. Dollar a more attractive investment.

USD/JPY Weekly Price Forecast – US dollar breaks out for the week

The US dollar has rallied significantly during the week, breaking above the ¥113 level. At this point, I think that pullbacks are going to offer value the people are willing to take advantage of, and we should then go to the ¥114.50 level, possibly even the ¥115 level. Based upon the monthly chart, I believe that we are looking at a move towards 120 young level, but obviously that will take quite a bit of work. Longer-term traders will simply hang onto this trade, using a stop loss below the ¥113 level to give us an opportunity to profit. Shorter-term traders will continue to buy short-term dips, and I do think eventually we will continue to go higher.

At this point, I believe that the bullish candle shows just how bullish this market has become as we start to focus on longer-term interest rate differentials. I think that the market underneath also has support at ¥111. Overall, this is a market that continues to see buyers on fundamentals and of course the fact that the Bank of Japan looks very unlikely to change its monetary policy. We already know that the Federal Reserve is going to continue typing, so this makes this a straightforward trade. That doesn’t mean that it’s going to be easy, and of course there will always be volatility. However, if you keep your position size realistic and of course reasonable, you can take advantage of what I think it’s going to be a nice multi-year bull run.

USD/JPY Video 01.10.18

GBP/USD Weekly Price Forecast – British pound continues to struggle with resistance

The British pound rallied during the week but turned around of form a shooting star again. This is a negative turn of events, but the 1.30 level underneath and of course the previous downtrend line is ever present. It is because of this that I am not ready to start shorting quite yet. However, if we get a daily close below the 1.30 level, then the market probably unwinds towards the 1.2750 level after that. Alternately, if we break above the wicks of the couple of candles on the chart, that would be an extraordinarily explosive sign of bullish pressure.

We are approaching the end of the Brexit drama when it comes to the British pound, and in this scenario I would anticipate a lot of volatility. It is because of this that the longer-term trader probably starts to think about value more than anything else. They also shouldn’t be putting a lot of their account at risk in this pair. However, if we do break out to the upside it is the beginning of a major “buy-and-hold” scenario. This could be a potential trend change, and if that’s the case it could last several years. I suspect that the British pound is historically cheap and a lot of longer-term traders are starting to look at it as such, and that is the major hope I have for this pair. However, I recognize that a break down below the 1.30 level is a clear signal as well.

GBP/USD Video 01.10.18

GBP/JPY Weekly Price Forecast – British pound continues to struggle with resistance above

The British pound has spent the week trying to rally but has given back a bit of the gains against the Japanese yen. It’s not a huge surprise, because quite frankly the ¥150 level is about as big of a “round number” as you can get. It’s also a scene of the previous resistance and of course support, so at this point I think that the overall attitude of the market will continue to be one that wants the breakout, but this pair is focusing on a couple of things right now, which obviously would be the Brexit, and of course the global trade war that seems to be heating up.

The downtrend line that was broken since below, and that should be a good sign for this market, but I also think that we have a lot of volatility ahead of us. At this point, I remain bullish but I’m looking for a small position until we can clear the ¥150 level on a daily close. Once we get that, then I think it’s time to start adding to your position. Recognize that trend changes are very volatile, and therefore you should not expect rewards right away. This is most certainly more of an investment than a trade. If we break down below the downtrend line and perhaps the weekly candle from the previous week, then I think the market unwinds towards the ¥145 level, and then the ¥140 level after that.

GBP/JPY  Video 01.10.18

EUR/USD Weekly Price Forecast – Euro pulls back to consolidate

The Euro fell during most of the week, mainly in reaction to the Italian budgetary concerns, as the EU continues to struggle to get all of its members in line. Ultimately, I think that the market has simply reasserted that the area between the 1.15 and the 1.18 levels continues to be the “battlefield.” However, I would point out that this candle is much more bearish than ones that we have seen lately, so this is certainly something to pay attention to.

At this point, I would not want to be a long-term trader in this pair as it simply doesn’t seem to be ready to go anywhere for a significant move. Even if we were to break down below the 1.15 handle, there is a wicket hammer at the 50% Fibonacci retracement level from two months ago. If we break out to the upside, that might be a bit more promising but there’s a lot of noise to be found near the 1.20 level. In other words, this pair remains the playground of high-frequency traders and short-term scalpers. Longer-term traders will find much easier trades around the Forex world, as this pair has been so choppy over the last several months. Until we can break out of one of these areas cleanly and significantly, this will be a very difficult place to put longer-term money to work. I would keep my position size small initially, and if it worked out in my favor add to it.

EUR/USD Video 01.10.18

AUD/USD Weekly Price Forecast – Aussie struggles slightly

The Australian dollar has been very resilient considering that we have a major flareup in tensions between the Americans and Chinese. Remember, the Australian economy is highly sensitive to what goes on in China, and if there’s going to be a significant escalation to the trade war, it would make sense that it hurts the Aussie economy and therefore the currency. I also recognize that we have seen a major break out above a shooting star at the bottom of a downtrend, sometimes referred to as an inverted hammer, and that is generally a very positive sign as well. That doesn’t mean that it’s good to be easy to go higher, just that the market is certainly trying to make that happen.

The 0.7350 level will be significant in its importance though, so don’t underestimate that. If we can break above that level, then we will more than likely go looking towards the 0.75 handle, and then possibly even higher than that. Expect a lot of noise, and of course pay attention to what golds going, because it can lead the way quite often. At this point, it’s difficult to put a lot of money in the market, as there is so much in the way of noise but I also recognize that we are getting at extraordinarily low levels, so as long as things stabilize and don’t escalate too much, it’s very likely that we will see value hunting continue.

AUD/USD Video 01.10.18

USD/JPY Price Forecast – US dollar continues to bounce around at high levels against the Japanese yen

The US dollar has rallied rather significantly against the Japanese yen during the day on Friday, as we continue to see a lot of bullish pressure. The Japanese yen pair has a significant resistance barrier near the ¥114.50 level, an area that is going to continue to be important. I think that will be the next target, and I think that the market is certainly going to go looking for that area. At this point, more than willing to buy dips that show signs of support, as the ¥113.25 level should be rather supported. Buying the dips is the best way to deal with a breakout like we have had, but that doesn’t necessarily mean that it is going to be easy. Obviously, this pair is sensitive to overall risk appetite, which has of course been in flux.

The interest rate differential does seem to be one of the main drivers of this pair, which is a refreshing change of pace. This is how currency markets typically would function historically, but in the ultra-low interest rate environment that the market has been in for 10 years has distorted the way these pairs  operate. I think that the ¥113 level underneath is the “floor” of the uptrend in the short term, and as long as we can stay above that area I believe that the buyers will continue to push. Eventually, I would anticipate that the 114 point 50 Yen Level Will Give Way, and we will probably reach towards the ¥115 level. Breaking above there, it’s very likely that we go to the ¥120 level based upon longer-term charts.

USD/JPY Video 01.10.18