While the FOMC is pulling attention toward the USD, the Japanese yen is sliding sharply. The BoJ has reiterated its intent in staying course with the current stimulus measures. Weak economic data suggests no reason to tighten monetary policy.
Today, the Japanese yet continued to fall and we are seeing sharp rallies in the USD/JPY, EUR/JPY, GBP/JPY.
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In the past 2 weeks, USD/JPY was consolidating roughly between 106.80 and 107.40. Today, price broke above this 60-pip range. Using a 60-pip projection above 107.40, the short-term target would be 108.00. With the FOMC meeting looming, we probably should expect some volatility ahead. If price can hold north of 107.20 after the initial reactions, we should expect further upside to 108 and beyond. A break back below 106.80 after the FOMC meeting should be a sign that USD is going to be in a period of consolidation, though we might still limit our bearish outlook for USD/JPY to 106, since the Japanese Yen is so weak.
The EUR/JPY started the week with a breakout above a falling trendline from 143.78. This breakout also brought the daily RSI above 60, showing loss of bearish momentum. The next resistance now is at 140, where the 200-day SMA resides. If EUR/JPY clears that, it could be on its way to the 143.78 March high, with upside risk toward 145.69 2014-high, though we should limit the bullish outlook since the EUR is in a weak environment.
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GBP/JPY just made a fresh high on the year, breaking above the 175.36 high made in July. Just earlier today, I posted some bullish targets for the GBP/JPY pending a break above that 175.36 high, but they are for the long-term. If price falls back below 173 however, the bullish outlook might need to be shelved and GBP/JPY might be back in consolidation.
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