USD/JPY Forecast: Trapped between trend line hurdle & 23.6% Fibo support

USD/JPY pair spiked to a high of 106.54 levels in the Asian session on Wednesday after reports hit the wires the Japanese government is ready to unveil a JPY 28 trillion stimulus package. However, the details of the plan revealed the actually fiscal stimulus package is worth just JPY 5 trillion with only about JPY 2 trillion funded by the FY16 second supplementary budget. The remaining amount reflects measures to be taken over the years and reallocations. Consequently, the currency pair trimmed gains to trade around 105.17 only to strengthen in the US session to 105.86 before falling to a session low of 104.76 in Asia.

FOMC statement was slightly hawkish, but was largely in line with market expectations. Doors remain open for September rate hike ‘if’ the economy remains resilient and financial markets are steady. A significant majority had expected the Fed to hint at September easing, which never came through. Consequently, USD was offered across the board after a minor initial up move quickly ran out of steam.

The focus now is on tomorrow’s Bank of Japan (BOJ) meeting. Weekly jobless claims, advance goods trade balance and regional Fed manufacturing indices release in the US could influence the pair. But, overall the spot appears stuck between the daily falling trend line hurdle seen around 106.40 and 23.6% Fibo of Jan 29 high-June 24 low seen at 104.19.

Technicals – Range could remain intact ahead of BOJ

Daily Chart

• Pair’s third failure at falling trend line resistance in last seven days and a subsequent move lower to 104.80 levels in Asian session today suggests even though a corrective move from the high of 107.49 may have come to end, still choppy action is likely unless 104.19 (23.6% of Jan 29 high – June 24 low) is breached on the downside, in which case support at 103.39 (July 1 high) stands exposed.
• On the higher side, only a day end closing above 106.40 (falling trend line level) would suggest continuation of the uptrend from post Brexit lows.

AUD/USD Forecast: Will Aussie hold on to gains as yield spread stays unchanged?

AUD/USD is up in Asia, but the question is whether the rebound from yesterday’s low of 0.7420 to 0.7529 levels could be sustained. This is because the benchmark AU-US 10-yr yield spread remains largely unchanged around 38 basis points. The 2-yr yield spread (at 0.813 from post AU CPI of 0.84) has improved slightly in favor of the US dollar. Hence, caution is advised on upticks.

Technicals – Bullish only above 0.7571

Daily chart

• Despite pair’s sharp recovery from 0.7420 (50-DMA) the odds of a bearish move remain intact as the spot still trades well below 0.7571 (61.8% of 0.7835-0.7145).
• The Doji candle on daily chart signals indecisiveness and warrants caution unless a clear break above 0.7571 or a break below 0.7409 (38.2% of 0.7835-0.7145) isn’t achieved.
• A failure to sustain above 100-DMA of 0.7486 would suggest a break below 0.7409 which would signal continuation of retreat from July 15 high of 0.7676 levels.

NZD/USD Forecast: More gains above 0.7112

Daily Chart

• Pair’s sharp recovery from July 21 low of 0.6951 to 0.7115 levels in Asian session today suggests a short-term bottom is in place, although further gains need a day end closing above 0.7112 (61.8% Fibo exp of 0.6347-0.7054-0.6675), in which case resistance at 0.7171 (23.6% of 0.6675-0.7325) stands exposed.
• On the other hand, rejection at 0.7112 could result in a loss of momentum and sideways to choppy trading in range of 0.7112 and 50-DMA seen today at 0.7029.