Trading activity and volatility in financial markets are still at a high level, which is contributed not only by macroeconomic data but also verbal interventions. Last week, the US dollar weakened against currency majors. The dollar index (#DX) moved away from annual highs and closed in the negative zone. Financial markets participants continue to assess the situation concerning trade conflict between the US and China, as well as the Brexit process. Dominic Raab, Secretary of State for Exiting the European Union, resigned. The official said he could not accept the current terms of the agreement between London and Brussels.
Some Fed representatives took a guarded position regarding the further monetary policy tightening, which caused a decrease in demand for the US currency. Fed Vice Chairman, Richard Clarida, believes that interest rates are around the neutral level. The official is concerned about the slow growth rate of the world economy and reports that the Central Bank needs to consider future statistics. According to the CME FedWatch Tool, the probability of an interest rate increase in December of the current year has decreased to 72.3%.
A number of important economic reports from the US will be published this week. It will influence the alignment of forces on currency majors in the short term. These statistics may also affect the expectations of financial markets participants regarding the future monetary policy of the Fed.
We recommend paying attention to the report on durable goods orders in the US, which will be published on Wednesday (15:30 GMT+2:00). Core durable goods orders are a key indicator of the health of a country's economy and reflect the change in the total volume of new durable goods orders excluding transportation. The growth rate indicates an increase in the activity of producers. Experts expect that in October the figure will increase by 0.4% compared with the previous value of +0.1%. We recommend considering the difference between the actual and forecasted values.
- Support levels: 112.600, 112.250, 111.850
- Resistance levels: 113.000, 113.350, 113.700
The bearish sentiment prevails on the USD/JPY currency pair. The trading instrument has updated local lows. At the moment, the USD/JPY quotes are consolidating in the range of 112.600-113.000. Indicators point to the power of sellers:
- The price has fixed below 200 MA;
- MACD histogram is in the negative zone and below the signal line.
The USD/JPY currency pair is tending to decline. A series of inside bars – Price Action patterns – is a confirmation signal.
If the price fixes below the support level of 112.600, we expect a further fall in the USD/JPY quotes. The immediate goal for profit taking is the 112.250 mark. The movement is tending to the key demand zone of 111.850-111.650.
Alternative option. If the price fixes above the round level of 113.000, it is necessary to consider purchases of USD/JPY. The movement is tending to 113.350-113.700.
Confirmations and entry points to the market should be looked for on lower timeframes. When following the positions, we recommend using a trailing stop.
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.