Narrow ranges have prevailed in low-volume markets. The Dollar consolidated at moderately softer levels after rallying on Friday, with all the main pairings holding comfortably within their respective Friday ranges.
EURUSD has settled in the upper 1.1300s, up from the four-session low seen on Friday at 1.1356, and USDJPY has settled near the 111.0 mark. Political instability in the US has become a worry for markets, coming at a time of turbulence in global finance markets. The US Treasury secretary Mnuchin has been trying to assuage markets, and is convening a “Plunge Protection Team”, while Trump has reportedly been mooting the idea of firing Fed Chairman Powell. The London interbank market will close at noon today, and will now be operating at skeleton staffing levels until the new year.
In the forex market, Yen has been the biggest gainer since last week. The slope on Thursday below the 2- month low at 111.35 and the critical break of the key level at 111.00 on Friday, have put the market in doubt as to whether that is a corrective move or a switch to a negative outlook for the pair, in the medium term.
The increase of negative bias for the outlook in the medium and near term, has also been justified by technical analysis. The pair is trading outside the lower Bollinger Bands for the 3rd consecutive day, as they keep extending to the downside. RSI has been flattened on the oversold barrier, suggesting consolidation in the near term but with further area to the downside. MACD turned negative while moving way lower than its signal line, something that implies a rising negative momentum.
USDJPY is currently trading close to a strong Support area, at the 200-day SMA ( which has been supporting the pair since August), at 110.92 and Thursday’s low at 111.80. The 200-day SMA also coincides with S1 for the day.
Therefore a break of 111.80-111.92 could trigger attention towards September low at 111.36 and further lower at 50-day SMA, at 111.29. In the medium term, the next Support is at August low, at 110.76. Immediate Resistance comes in at R1 and Thursday’s peak at 111.46. Key Resistance is at 111.72, which coincides with R2 and the 50% retracement of the past 2 day’s decline.
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