Happy Halloween FX fiends, I mean friends! Indeed, it is very scary at least for the USD as it is now trading at a new historical low versus the Japanese yen. To end the week, the USDJPY surpassed its former all-time low at 80.43 which it set way back in April 1995 and closed at 80.38. As you can see from its weekly chart, the pair has been on a long term downtrend since the latter part of 2007. Based on the Elliot Wave Principle, where prices move in a 5-wave cycle before correcting, the USDJPY pair could be on the final leg of its wave B. If my wave counting is correct, then the pair could rebound for awhile in the coming week or so, marking its wave C, before heading back south to start a new down wave. Given its oversold condition, it could, however, rally until it encounters some resistance at 85.00. Still, the pair would more likely be on track for some more losses because present trend. In any case, a close below its former low at 80.43 at the end of the month would place some more selling pressure on the greenback.
To end the month of October, the US market closed flat with the Dow ending with a mere 0.04% gain and the broader S&P 500 with a 0.04% loss. The US’s third quarter GDP missed its 2.1% target by a hair with a 2.0% growth. Despite the 2.6% increase in household spending, the country’s overall expansion remains subdued and it expected to be the same at least in the near term which brings the country at the realm of another non-traditional monetary easing by the Federal Reserve.
Speaking of the Fed, it will have its monetary easing meeting this coming Wednesday (November 3). The Fed is widely expected to pump more money in the country’s financial system to support consumer spending. Traders will also be on the look out for the US’s non-farm employment report (NFP) on November 5. US firms are expected to have added about 65,000 jobs during the recent month after cutting 95,000 during the previous period. Both expected results from the upcoming two major economic would be bearish for the greenback. An additional easing by the Fed would dilute the USD while the latter would spark some risk taking among investors. Risk taking, as we have been observing during these periods, would go against the dollar given its low interest rate. Nonetheless, expect some fireworks both in the financial market for the coming week. Stay on your toes!