The mood is also undoubtedly better on the slashing of rates by the Federal Reserve and ECB, with the latter also introducing QE in the last few months.
As for the USDJPY, the pair has mirrored some of the gains in the US stock markets, but a significant inverse head and shoulder pattern that has been developing since June suggests that more might lie ahead.
The July low and October lows make the left and right shoulders, while the August low is the head of the pattern. A neckline goes via the July 10, September 18, and October 1 highs. The pattern triggered a buy signal already on October 15, however, the price has been trading sideways since then. Yet as stock markets have gained in the last few days, and the USDJPY is now nearing the July 8 high, we might see a breakout.
The most significant near term risk to the bullish mood is Friday’s NFP and ISM report. Both reports are anticipated to show that the economy is struggling. Also, earlier today, the Chicago Fed Index and Dallas Fed index failed to meet expectations, the latter printer -5.1 but is still above -12.1 in June, while the former slid to -0.5 and matched the lows in May 2019.Download our latest quarterly market outlookfor our longer-term trade ideas.
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