The dollar / yen is lower early Thursday and is approaching its major low on November 6 at 103.177. Looking at the daily chart and seeing that the next major bearish target is 101.179, the main bottom from November 9, 2016, one can only think that we might be looking at a near term sell-off if aggressive countertrend buyers do do not intervene to stop the fall in prices.
At 04:57 GMT, USD / JPY is trading at 103.342, down 0.080 or -0.08%.
Although the US Federal Reserve was not as accommodating as expected on Wednesday afternoon, its pledge to support the economy along with the apparent progress in US fiscal stimulus talks is enough to keep the US dollar under pressure.
However, bearish traders have a choice. They can short the weakness through the main low at 103.177, or they can play for a short-term pullback to get a better entry price. At this time, I don’t see anything in the charts that could derail the downtrend of the US dollar, so our preference is for the short side. In our opinion, it would take a surprise event to send investors back into the dollar for protection.
Support for Fed commitments
The Fed said it would buy at least $ 120 billion in bonds each month “until further substantial progress has been made towards the committee’s maximum employment and price stability targets.” The Fed has refused to make changes to the length of its bond buying program, but President Jerome Powell has said the central bank will increase its asset purchases if the economic recovery slows.
US Rescue Agreement Close
Congressional leaders have reached a $ 900 billion bailout deal that would include a new round of direct payments to consumers. However, this package rules out a liability shield for business and state and local aid, CNBC confirmed. Politico first reported the news.
Looking ahead to Thursday, USD / JPY traders will have the opportunity to react to a number of US economic reports, including the Philly Fed Manufacturing Index, weekly jobless claims, building permits and stakes. under construction.
The weekly unemployment claims report is probably the most important since it is an indicator of the labor market. Traders expect the report to show 817K workers have applied for benefits. This would be down from the 853K reading last week.
Late Thursday / early Friday, the Bank of Japan is expected to keep monetary policy stable on Friday and is hopeful that the extension of an existing financial aid program will give businesses enough time to withstand the recent resurgence of coronavirus infections.
The path of least resistance is down, but how traders approach the possibility of a steep drop is a matter of personal preference. Our work indicates that the reaction of traders at 103,177 will determine the short term direction of the USD / JPY.