No Love for USDJPY

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Market Drivers November 27, 2017
USDJPY under pressure
Cable recovers
Nikkei -0.24% Dax -0.07%
Oil $58/bbl
Gold $1293/oz.

Europe and Asia:
No Data

North America:
USD New Home Sales 10:00

At the start of a post-holiday week, trading in the FX market was subdued. With no data or any political events on the calendar it may remain that way for the rest of the day, but the market will be watching persistent dollar weakness and especially the key 111.00 support level in USDJPY.

USDJPY appeared to stabilize at the end of last week’s trade as the pair held support ahead of the 111.00 figure, but any rebound quickly fizzled in early Asia dealing as the pair filed to hold above 111.50 and finds itself with 25 pips of the 111.00 barrier as we approach the North American open.

The weakness in price action is a bad sign for dollar bulls, suggesting that the selloff in the buck may not be over with the buck ultimately falling below 110.00 in USDJPY and 1.2000 in EURUSD as skepticism about Fed’s actions in 2018 continues to dominate flows.

As many analysts have noted, the central fundamental variable in dollar trade going forward is inflation – or rather the lack of it. With inflation data still very subdued traders see no reason that the Fed will hike rates next year at the 3 rate hike pace of 2017 and that growing doubt continues to weigh on dollar trade.

With nothing except New Homes on the calendar – trading may remain muted for rest of the day, but if the data misses it mark – USDJPY could see a test of 111.00 as shorts continue to press their case.

Boris Schlossberg
Managing Director

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