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Dollar Rally Against Yen, Aussie Dollar On US Growth Optimism

The dollar set a fresh 2-month high of 125.06 against the Japanese yen, but strong selling interest defended the critical level, triggering a strong reversal in the pair that fell down to 124.09 before finally stalling.

The failure around the critical figure of 125.00 increases now the risk of a bearish continuation in the pair, particularly if the 124.00 level gives up this Monday. On Friday, the Bank of Japan had its monthly economic meeting, where they decided to leave its policy unchanged.

Also, Governor Kuroda continues to see economic improvement in time, saying that the recent slowdown  is temporary. The Governor is still confident inflation will pick up early 2016.

Technically, the 4 hours chart supports some bearish continuation, as the Momentum indicator heads south below the 100 level, whilst the RSI indicator has lost its downward strength, but holds around 44. Usage about RSI indicator is explained very well in this course.

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A strong resistance level comes now at 124.45, which means a recovery above it will deny the downside, and favor another test of the 125.00 figure.

Meanwhile the AUD/USD pair closed above the 0.7400 for the first time in three weeks, as the Aussie got help from the RBA and local employment readings this past week.

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The Central Bank Governor, Glenn Stevens, unexpectedly changed his wording on the currency’s strength, saying that the AUD depreciation has done enough to help economy, whilst the country economy created over the triple of new jobs than what the market was expecting.

The pair however, may open the week with a soft tone, and even gap lower as Chinese exports declined more than expected in July, down 8.3%, whilst imports dropped 8.1%, leaving a trade surplus of $43 billion.

Technically, the 4 hours chart shows that the 200 EMA stands at 0.7440, providing a key dynamic resistance for the upcoming hours, as an extension beyond it, should lead to additional gains.

In the same chart the technical indicators maintain their bullish tone above their mid-lines, whilst the 20 SMA stands at 0.7360, which means that only below this last level the pair can turn intraday bearish, and decline towards the 0.7330 region.

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