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What We Are Watching:
- EURUSD Below Uptrend
- Post FOMC Meeting Dollar Rally
- US New Homes Sales
Not much going on this morning. The big stories are weak Asian equity prices as traders aren’t expecting much to come out of this week’s EU Summit. Elsewhere, the US releases its New Homes Sales data later today. We mentioned the dollar’s post FOMC rally in our morning video, but wanted to add some more color on the USDJPY in this post.
As you can see from the chart below, even as the Non Farm figures were worse than expected earlier this month, and the Bank of Japan stated that it wouldn’t apply another round of monetary stimulus, we still saw the USDJPY rally into the FOMC Meeting. That led to further momentum when the FOMC Meeting led to no new QE policies.
The current question now is whether we will see another surge in the USDJPY, similar to the one seen at the beginning of 2012, or will the move fizzle? Based on the previous rally being driven by better than expected Non Farm Payroll results, the answer to the above question will most likely be based on how the US figures fare. While ultimately the main driver of a rally will need to come from the next week’s Non Farm Payrolls, Forex traders should keep their eyes out for a slew of US data this week, starting with today’s New Homes Sales figures.
The EURUSD is currently around 1.2500 this morning as it has fallen below last week’s lows. The pair continues to be below its June uptrend line that we mentioned last week. As such, with the EURUSD failing to hold onto its previous support, it could pave the way for further weakness this morning.