FOREX: Trump Trade Headlines Weigh on CAD, JPY Downswing Extends

• The low yielders have been under pressure this morning, with USDJPY notably rising to within 10 pips of the post Fed highs at 148.38. Uncertainty regarding Japanese politics and the upcoming LDP leadership election may be playing its part here, while moving average studies continue to highlight a dominant uptrend for the pair. A resumption of gains would open 149.14, the Sep 3 high.
• Furthermore, the impressive grind higher for the likes of EURJPY and CHFJPY bolster the bearish yen theme. Fresh cycle highs for EURJPY today further consolidate the breach of 173.97 last week, keeping bullish conditions firmly intact. Sights are on 174.86 next, a Fibonacci projection, before the 2024 highs which reside at 175.43, a key medium-term resistance.
• US new home sales is the main data point later today, before Thursday’s US jobless claims data. It’s worth noting that Tokyo CPI is scheduled Friday.

• Over the course of the European morning, the US Dollar is trading with a supportive tone. Despite most major pairs remaining well within the post-Fed ranges, the likes of EUR and GBP have extended session declines to just shy of 0.4% in recent trade.
• For EURUSD, the solid amount of option expiries between 1.1750-1.1800 appear to have capped the overnight price action, with the pair slowly edging back below 1.1775 as we approach the NY crossover. Last week’s low at 1.1726 is the immediate point of reference on the downside, however, support to watch is at 1.1678. the 50-day EMA.
• GBPUSD has traded through the 50-day EMA, and this leaves support at 1.3458 exposed, a trendline drawn from the Aug 1 low. Clearance of this line would strengthen a bearish threat. Below here, key support resides at 1.3333, the Sep 3 low. 

Ahead of month-end, Bank of America’s rebalancing model points to EUR, GBP & JPY inflows, based on traditional 60/40 portfolios. Elsewhere, they flag the potential for outflows from EM and USD (marginally) as U.S. equities have rallied. They also note that positive equity and fixed income returns suggest rebalancing flows favour a firmer CHF.