USD/JPY Forecast – Don’t trust the upticks, falling channel intact

Dollar-Yen pair rose to a high of 101.84 levels before ending the day at 101.02 levels. The pair failed to hold on the gains despite the upward revision of the second quarter US GDP to 1.4%. Moreover, losses in the US stocks could have weighed over the pair. Furthermore, the probability of a December rate hike is at the coin toss levels.

Japan’s household and corporate spending remains low

A report from ‘The economist’ says some 61% of the Japanese GDP comes from spending, however, household spending remains weak. The data released today showed the household spending dropped 4.6% in August compared to an expected decline of 2.10%. Meanwhile, Japanese corporate sit on a pile of cash – approx JPY 377 trillion and are unwilling to boost wages.

No wonder, the nations remains stuck in deflation. Consumer price Index released today showed cost of living dropped 0.5% in August as expected from last month’s -0.4% reading. The upbeat industrial production figure released today failed to impressed markets.

Focus on US personal spending data

The focus today is on the US personal spending report, which is expected to show a slowdown to 0.1% in August from the July figure of 0.3%. Personal income growth is seen slowing to 0.2% as well from July figure of 0.4%.

US consumer confidence had spiked to an 11-month in August. Furthermore, July month non-farm payrolls had shown the economy added 255K jobs in July. Consequently, we may see personal spending figure beat estimates. If so, Dollar-Yen could revisit falling channel hurdle around 102.00 levels. On the other hand, a negative surprise could yield a drop below 100.71 (50% of 2011 low – 2015 high).

Technicals – Losses likely below 100.98

Daily chart

• Pair’s sharp retreat from the high of 101.84 suggests the rebound from Tuesday’s low of 100.08 has run out of steam and could yield sideways action unless the Asian session low of 100.98 is breached in which case the spot could breach 100.71 (50% of 2011 low – 2015 high) and head towards 100.00 levels.
• Uptick on a possible strong US data cannot be ruled out, although yesterday’s retreat from 101.84 indicates the rise today has to be related with caution. Bulls are likely to feel more comfortable only if the pair sees a daily close above 101.90 (falling channel resistance).

AUD/USD Forecast: Rebound from 0.7600 handle likely

Daily chart

• Pair’s sharp retreat yesterday from the high of 0.7710 (expanding channel resistance on the daily chart) suggest the rally from Sep 13 low of 0.7442 has run out of steam, still the short-term moving average – 5-DMA and 10-DMA are sloping higher, which suggests the spot could rebound from the psychological level of 0.76 handle is likely.
• Such a move if followed by a break above Asian session high of 0.7637 could yield a re-test of monthly pivot resistance level of 0.7691.

NZD/USD Forecast: Increased odds of a break below 0.72 handle

Daily chart

• Pair’s rebound from near 0.72 handle on Monday and a subsequent failure near the falling trendline resistance followed by a move back below rising trend line and 0.7250 levels suggests the spot could chew through bids around 0.72 handle.
• The level has acted as a strong support since mid August, hence a breach of 0.72 handle would open doors for a quick fire loss to 0.71 levels.
• On the higher side, only a daily close above 0.73 (falling trend line) would signal bearish invalidation.