November 24, 2021 9:53:30
The dollar is powering higher this morning, especially against low yielding currencies like JPY and CHF. We get a deluge of US data today ahead of the holiday. This includes the weekly initial job claims, durable goods data and more inflation numbers. These are all expected to improve on the prior month and further support the greenback.
The FOMC minutes out this evening covers the Fed meeting when policymakers announced the tapering of bond purchases. Although a little stale, we may get to hear about the next steps around policy tightening. Events which could lead to a change in the pace of tapering will also be seized on by the market.
USD/JPY holds above 114.69
This major has a strong positive correlation with US 10-year yields, as we have written previously. These have seen a decent move since earlier on in the month when yields dropped close to 1.40%. Yesterday’s push higher took them above 1.68%, with eyes very much on recent highs around 1.75%.
This morning, USD/JPY has hit levels not seen since March 2017. The monthly chart shows the clear bullish break at the start of October above 112.07. We then climbed quickly into the long-term resistance zone in the mid-114s. This has the October 2018 peak at 114.55, plus previous tops from 2017 through to 2018. The Fib level (78.6%) of the 2016/2020 decline sits at 114.92.
Near-term upside targets include 115.50. This comes ahead of major resistance at the December 2016 top and 2017 high around 118.61/66. Much may depend on if the US 10-year yield breaks 1.75%.
The daily chart shows the recent range between 113.25 and 114.69. We had a downside break and then an upside one before this week’s bullish move. We wrote previously how coiling prices should see range expansion in line with the dominant longer-term trend.
The upper part of the range now becomes support, as does the previous long-term resistance zone in the mid-114s. Trendline support also comes in above 114. The close today and especially on the week will be key for more upside.
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