Forex Video Briefing (10/7) – BoJ and USD/JPY
Last week, we got a boost in the USD/JPY after the NFP showed better-than-expected job growth in September, while the unemployment rate fell to a 6-year low of 5.9%. This boosted the USD across the board, and the USD/JPY rallied. However, we can see that price failed to break through 110.00, and a double top scenario is developing.
Also note that the RSI has tagged 30 and then failed to break above 60, showing development of the bearish momentum. Price now looks poised to test the 108.00 support pivot from last week.
A break below 108.00 would complete a double top and suggest a significant period of consolidation/bearish correction, until the next FOMC meeting, which is on Oct. 29. We do have meeting minutes tomorrow, and if price comes back above 109.00, the topping scenario could be shelved. In fact if there is a completed double top, we should probably monitor for a pullback to hold below 109.00, or at least below the 109.23 pivot as a strong signal for bearish correction. In that scenario, we have downside risk first to the 107.00 handle. The most aggressive bearish outlook should be limited to the 105.45 area, which is the previous 2014-high before September price action broke through. It would also be the 50-day simple moving average.
Now if this brief fling of a consolidation ends after this week, and price rallies back above 109.25, USD/JPY will likely to test and eventually break above 110.00 towards at least the 110.68, 2008-high.