Bullish USD/JPY Momentum Remains Intact Ahead Of FOMC Meeting

AUD/USD Daily

Chart – Created Using Trading View

• AUD/USD makes another run at near-term resistance around 0.7500 (50% retracement), with the pair still trading within the upward trending channel from the November low (0.7311), but the broader outlook remains tilted to the downside especially as bear-flag formation appears to be taking shape; may see the continuation pattern unfold once price & the Relative Strength Index (RSI) break down from bullish trends carried over from the previous month.
• With Australia Employment anticipated to increase another 17.5K in November, a further improvement in the labor market may not only keep the Reserve Bank of Australia (RBA) on the sidelines, but Governor Philip Lowe and Co. may show a greater willingness to gradually move away from its easing-cycle next year as the central bank argues ‘globally, the outlook for inflation is more balanced than it has been for some time.’
• Another failed attempt to clear the 0.7500 handle may produce range-bound prices over the days ahead, but a closing price below 0.7450 (38.2% retracement) may spark a move back towards 0.7390 (38.2% retracement) followed by the December low (0.7370).

USD/JPY Daily

Chart – Created Using Trading View

• USD/JPY may continue to push to fresh monthly highs ahead of the Federal Open Market Committee’s (FOMC) December 14 interest rate decision as the bull-flag formation unfolds, while the RSI stubbornly hold in overbought territory; need the oscillator to highlight a textbook sell-signal (move below 70) to pave the way for a near-tern pullback in the exchange rate.
• With the Fed widely anticipated to raise the benchmark interest rate next week, speculation for higher borrowing-costs accompanied by the pickup in risk sentiment may fuel the dollar-yen rally, with the Nikkei 225 displaying similar dynamics as the benchmark equity index breaks out of the downward trend from earlier this year; the marked advance in USD/JPY should keep the Bank of Japan (BoJ) on the sidelines at its last 2016 interest rate decision on December 20, but it seems as though Governor Haruhiko Kuroda and Co. will keep the door open to further embark on its easing-cycle as the central bank struggles to achieve the 2% target for inflation.
• Topside targets remain favored for USD/JPY as long as the RSI lingers in overbought territory, with the first hurdle coming in around 116.30 (23.6% retracement) to 116.60 (38.2% expansion) followed by 117.60 (23.6% retracement).