Global equities traded in a choppy manner yesterday after the FED July minutes left market participants confused.
In the U.S, stocks closed mostly higher with the Dow rising by +0.12% and S&P500 by +0.19% after suffering from heavy selling pressure in early U.S trading session.
Conversely, European stocks fell sharply on Wednesday as investors were waiting cautiously for the release of the latest FED minutes. The German DAX ended the day sharply lower losing as much as -1.30%.
In the commodity market, Gold was little changed ending the day at $1348 per ounce after the recent minutes showed the need for more economic data, while Oil rally continue as crude prices edged towards $47 per barrel.
Meanwhile,the FOMC meeting minutes did not specify the timing of the next rate hike as Federal Reserve policy makers had divided views on the U.S economy growth. This lack of consensus has brought uncertainty back to the table, which led to a choppy trading towards the U.S Dollar. Both EUR/USD and GBP/USD closed slightly higher at 1.1288 and 1.3040 respectively, while the Japanese Yen surged again pushing USD/JPY to as low as 100.03 following the minutes report.
Now let us have a look at the recent price action in both the Dollar index along with USD/JPY pair
Dollar index
From a technical standpoint, we can see that the Dollar has failed to break above 95.90/96.00 hourly resistance for the third time this week, which signals a clear slowdown in the bullish momentum in the near-term.
In addition, the index has ended last week in the negative territory. Therefore, another re-test of 92.0 support remain possible during the weeks ahead especially if the Greenback keeps trading below 95.10 peak.
Looking at the biggest picture, the Dollar index is showing a bearish head and shoulders reversal pattern in the weekly chart, and prices can be in the process of forming the right shoulder actually. If this technical picture is validated, then we should expect a big drop in the Dollar by the beginning of Q4 and prices can target 90.00-88.00 zone easily in the coming months. However, a weekly close below 92.00 area is needed to confirm these theoretical targets.
Support: 94.00-93.50-92.00
Resistance: 95.10-95.90-96.20
USD/JPY
The pair keep fighting to print fresh yearly lows as bulls did not throw the sponges yet.
Looking at the hourly chart, prices keep following a bearish wave structure, which keeps the negative trend intact in this pair. In the daily chart, the pair keep printing lower highs/ lower lows since 114.90 peak and consequently the upside potential is likely to remain limited.
For the time being, the pair may continue its path in the direction of 99.00 handle as far as prices keep trading below 101.20 peak and a daily close below the psychological support of 100.00 today, will reinforce this scenario.
Support: 99.80-99.50-99.00
Resistance: 100.65-101.20-102.70/80