OUTLOOK: Price Signal Summary - USDJPY Corrective Cycle Still In Play
Dec-05 11:20
- In FX, a bullish theme in EURUSD remains intact. Gains this week resulted in a breach of key short-term resistance at 1.1656, the Nov 13 high and a bull trigger. Clearance of this level opens 1.1694 next, the 50.0% retracement of the Sep 17 - Nov 5 bear leg. Clearance of this retracement point would strengthen the developing bull theme. On the downside, initial support to watch is 1.1597, the 20-day EMA.
- A bull theme in GBPUSD remains intact. The pair rallied sharply higher Wednesday to clear resistance around the 50-day EMA, at 1.3262. The break undermines a recent bearish theme and highlights a stronger reversal towards 1.3452, 50.0% retracement of the Sep 17 - Nov 4 bear leg. Initial firm support is seen at 1.3215, the 20-day EMA.
- A corrective cycle in USDJPY remains in play and a deeper retracement is allowing a recent overbought condition to unwind. Support at 155.30, the 20-day EMA, has been breached. The extension lower exposes the 50-day EMA at 153.41. Moving average studies remain in a bull-mode position, highlighting a dominant medium-term uptrend. A resumption of the trend would open 158.00.
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STIR: Fed Rates Steady Before Important Data Updates
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- Fed Funds implied rates hold yesterday’s modest decline in risk-off moves ahead of a more notable docket today with the October ADP and ISM Services reports plus any spillover to front rates from Treasury’s QRA at 0830ET.
- Dec FOMC pricing still holds nearly all of the hawkish adjustment seen after Powell noted a strongly divided committee around December cut prospects at Wednesday’s press conference.
- Cumulative cuts from 3.87% effective: 17bp Dec, 26bp Jan, 35bp Mar, 41.5bp Apr and 56bp Jun.
- SOFR futures are mostly 2 ticks higher on the day looking out to end-2027, with the terminal implied yield edging a little lower to 3.075% (H7) after Monday’s 3.115% highest close since August.
- The SOFR implied terminal yield
- Today sees a pause in scheduled Fedspeak before a heavy schedule tomorrow with Barr, Hammack, Musalem, Paulson, Waller and Williams.
