I have written several pieces discussing the likelihood of a dollar relief rally and now the increasing momentum of that rally. I recently concluded that the British pound’s break of technical support at the 50-day moving average (DMA) all but confirmed the dollar index’s imminent rendezvous with its 200DMA. However, in all these pieces, I have neglected to point out that the dollar is even regaining lost ground against the yen. Most significantly, the dollar has regained almost half its surge from the Bank of Japan’s (BoJ) big currency intervention two months ago.
(Click for larger view)
Source: dailyfx.com charts
The Federal Reserve pre-announced the coming of another round of quantitative easing shortly after the BoJ’s intervention, and it seemed the Fed had won another round of competitive devaluation. Perhaps the BoJ can start relaxing now.
(Note that the dollar index is now only 1.7% away from another test of the all-important 200DMA).
Be careful out there!
Full disclosure: long USD/JPY