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The current mixture of strong macroeconomic signals and what is expected to be a strong showing from today's nonfarm payrolls report is flashing a "green light" to Federal Reserve hawks. Meanwhile, fear of Sunday's Italian vote seems to be fading.
Article / 26 September 2016 at 14:04 GMT

FX Board: USD needs to pivot soon

Head of FX Strategy / Saxo Bank
Denmark
  • USDJPY rangebound after post-BoJ/FOMC tumble
  • Downside 100.00-99.50 zone would resolve descending triangle
  • Greenback needs to find direction against G7 rivals soon

US dollar
It's decision time for USD traders. Photo: iStock 

By John J Hardy

Please see Notes on Interest in the attached FX Board PDF for further comments on the outlook for key FX pairs.

USDJPY

The big move lower off the back of the Bank of Japan policy changes and Federal Open Market Committee no-go on a rate hike last week yielded to a trio of rangebound sessions as traders continue to refuse to take a stand. 

The obvious downside pivot zone from 100.00-99.50 would resolve the descending triangle, while bulls might seize on even a relatively modest rally over the next couple of days as a sign that last week's sell-off was a red herring, though the bigger signal would be a break of the descending trendline and the Ichimoku cloud. 

Either way, the pair can't stay in no-man's land for much longer and if we close on the low side today, a stress test of the downside pivot would look like the direction of least resistance.

usdjpy

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Source: Saxo Bank 

AUDUSD

Another USD chart of interest is AUDUSD where we've seen a number of choppy waves of approximately equal size in recent weeks. Either we chop back lower from here to continue this patter or else a rally through 0.7700/50 threatens this pattern and suggests a test of the highs for the year above 0.7800.

audusd
Source: Saxo Bank 

— Edited by Michael McKenna

John J Hardy is head of FX strategy at Saxo Bank 
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FX Board for Monday, September 26, 2016

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