This has been a tricky and volatile week, with the US Dollar erasing earlier gains, amidst a relief rally by the Euro and the British Pound, as well as some repricing from markets around the Fed's tightening path due to heightened recession fears.
Yesterday's data showed that the US economy shrunk by 0.6% in the second quarter, marking the second straight quarter of negative growth, after the 1.4% contraction in Q1. Today, market participants turn to US PCE inflation, which can determine greenback's trajectory and spark volatility.
CME's FedWatch Tool still expects a 75 basis points hike in November and 50 bps in December, but with lower sub-60% probabilities at the time of writing . However, Fed officials reiterated their hawkish stance this week and their commitment to restore price stability.
Speaking on CNBC on Thursday, Ms Mester (voter) said that it is not the time to think about stopping or whether they have gone too far, as rates are still "not even in restrictive territory" and inflation is at forty year highs. 
Even though the greenback is having difficulties over the last few days against some of its major counterparts, it remains strong against the Yen, as the monetary policy differential is chaotic.
The negative impact from last week's FX intervention by Japanese authorities had only a short-lived negative impact on USD/JPY, which runs its seventh straight profitable week and heads towards the conclusion of another strong month.
The relevant correction was contained by the 38.2% Fibonacci of the August low/September high advance, which keeps bulls on track for new 24-year highs (current at 145.90), although it may be still early for to talk about sustained advance beyond 147.90-150.00.
On the other hand, as long as USD/JPY does not break new ground, there is scope for renewed pressure towards 142.23-141.30, but the area from there on is well protected, as it contains the EMA200, the 38.2% Fibonacci and the ascending trendline from the August lows.
Senior Market Specialist
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
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