Summary:
- The USD/JPY flirted with nearly 3-month high as the Japanese yen slipped, reacting to the fact that Shinzo Abe won the second term as PM in the snap election which indicated the extension of the on-going ultra-loose monetary policy in Japan.
- The dollar index approached highs of 6 October, waiting for dictations from ECB policy decision and U.S. 3Q GDP on the week.
The dollar index gapped higher at the opening in Monday’s Asian session, close to highs of 6 October. The USD/JPY gapped higher as well while the Japanese yen slipped due to PM Shinzo Abe’s coalition gained landscape win in the general elections, indicating we may not see the end of the on-going ultra-loose monetary policy in Japan in the near future. We will get two major central banks decisions – the Bank of Canada (BoC) and the European Central Bank (ECB) – and GDP reports both from UK and America on the week.
Technical
The dollar index (DXY) retreated after opening higher, closed the so-called gap. Its short term moving averages turned higher again with strong momentum while its long term moving averages drifted into bullish and diverging state after they flattened on the 1 hour chart. The price action showed the market structure of three bullish impulsive waves. Keep an eye the index on the week and watch whether or not it could challenge the upside resistance at highs of 6 October.
As to non-U.S. currencies, the euro modestly rebounded after slip early Monday morning within the overall short-term downtrend of last week with upside resistance at H1-period EMA30, depending on its extension of corrective rally. The sterling traded sideways below its H1-period EMA169 after bouncing back last Friday. It will be interesting to watch whether or not the British pound could break out its trading range. The Aussie dollar needed a corrective rally after the sharp decline last Friday. We may see the commodity currency stage a three-bearish-impulsive-waves structure on the daily chart.
Switching gears to the precious metals now, the gold declined below its lows of last week. Its short term moving averages turned lower again with modestly strong downside momentum while its long term moving averages drifted into bearish and diverging stage on the 4 hour chart. Whether or not the yellow metal’s decline could continue after its short-term corrective rally will be important to observe.
By JasonZou —— Chief Analyst of AvaTrade China
Disclaimer: The views and opinions expressed in this article are those of the authors and for the purpose of reference only, and shall not be relied upon by investors in making any trading decisions.