USD/JPY Forecast: What’s next following a 3-month high daily close

Wednesday’s close of 104.48 in USD/JPY pair was the highest since Juley 27. Bid tone around the US dollar strengthened yesterday, tracking the rise in the treasury yields after a drop in the monthly trade deficit due to rise exports and upbeat Markit services PMI report boosted expectations for Q3 GDP due for release on Friday.

Further gains likely on strong durable goods orders report

US durable goods order number for September is likely to show corporate spending remained anemic in September. A better-than-expected data could boost expectations of a strong US GDP release on Friday. Many in the market believe US economy may have grown at the fastest pace in two years. Hence, dollar could see another wave of buying in anticipation of a strong GDP, if the durable goods print betters estimates. This scenario goes well with the pair’s three-month high closing on Wednesday which also marked a bullish break above key reistance level of 104.32 (September high). The bird could extend gains to 105.50-106.00 in this scenario.

On the other hand, a weaker-than-expected durable goods number is unlikely to weigh significantly over December Fed rate hike bets. This is beacuase the bar of expectations is already very low. Nevertheless, a weaker data could trigger a technical correction in the pair.

BOJ next week

We also have Bank of Japan (BOJ rate decision due next week. We are not worried about the central bank pressing the easing button again, given the fact that each time the bank announces easing; it ends up sending JPY higher. Consequently, no action could turn out to be a good action and could actually end up paving way for more Yen weakness. There are rumors doing the rounds that BOJ is conserving delaying 2% inflation target to FY 2018. If anything, the news could keep a lid on Yen gains.  

Techncials – Far from being overbought

Daily chart

• Daily RSI is above 50.00 and still well below the overbought region, suggesting the dollar bulls have a little reason to fear.
• Continuation of the uptrend appears likely as suggested by short-term moving averges – 5-DMA & 10-DMA which are sloping higher.
• Consequently, resistance at 105.00 – 105.50 could be put to test over the next few days.
• Tuesday’s gravestone Doji could force bulls to reconsider the vailidity of the bullish break, thus leading to a minor corrective move to 5-DMA support around 104.25-104.00 levels. However, the fact that September highs have been finally brached on daily closing basis is likely to ensure the pair moves higher towards 105.00 levels.

AUD/USD Forecast: Needs break above 0.7734

Daily chart

• Despite rebound from 0.7589 (Oct 25 low), the subsequent failure above 0.77 on Wednesday and retreat to 0.7650 suggest the weak trend set in motion by last Thursday’s bearish engulfing/outside day candle remains intact and a breach of a mini rising trend line (drawn from Oct 13 low and Oct 25 low) would open doors for a re-test and possibly breach of 0.7589 levels.
• On the higher sides, only a daily close above 0.7734 (last Thursday’s high) would signal continuation of the uptrend from Oct 13 low and could yield a move to 0.7835 (yearly high).

NZD/USD Forecast: Revisit to sub 0.71 levels likely

Daily chart

• Despite Tuesday’s rebound from the falling trend line support of 0.7109, the subsequent failure at 0.7184 yesteday and a weak closing at 0.7153 coupled with daily MACD suggesting loss of bullish momentum and daily RSI remaining below 50.00 suggests the pair is likely to revisit trend lines support seen today around 0.7090.
• On the higher side, only a daily close above 0.7266 (Oct 20 high) from here could lead to higher bottoms formation and signal further gains towards 0.7350-0.7380 levels.