Forex Video Briefing (7/16): USDX and USD/JPY after Yellen’s QA Sessions

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Forex Video Briefing (7/16): USDX and USD/JPY after Yellen’s QA Sessions

The USD Index fell from June’s and the 2014 high of 81 then found support at 79.75. In July, the index has risen back above 80, and is around 80.50 today, unmoved by Janet Yellen’s congressional testimony. Will July’s rally continue? If it does climb above 80.60, it will clear 61.8% retracement of the June decline, and the prospect of returning to USD-strength will increase. However, a break back below 80.50 today wuold respect to 61.8% retracement, which keeps the bearish outlook alive. Another couple of clues: The RSI is overbought in the 4h chart. If the market is not bullish, this means its overbought. And the market is at most sideways so the overbought condition applies. Also note that in July the run up has been an ABC correction, and traders might see this as a gartley pattern, with bearish intent.

The USD/JPY was left directionless after the Janet Yellen’s 2-day event risk. It has been slightly bullish since the end of last week, but the trend since June has been bearish, and there is nothing this week that suggests a reversal of that. In the previous briefings, I noted 102 as a key resistance. Unfortunately, we did not see a test of that level. With nothing shaking up the USD, the general trend should be bearish with focus toward the 2014-lows at 100.76. We can either look for overbought conditions in the 4H chart as price approaches 102 and the falling trendline. If this rally does not develop, and price falls below 101.60, we can instead anticipate a bearish swing already in progress first toward last week’s lows around 101.10, then the 2014-lows.A break above 102 however exposes the June high around 102.80 as well as the 103 handle.