Great Graphic: Dollar Breaks Out Against Yen
The dollar is at new lows for the year against the euro and Swiss franc. Draghi's comments earlier that transitory forces are dampening price pressures were seen as broadly similar to the Fed's leadership's assessment about US prices. The implication is that the ECB will announce tapering its purchases as it extends them into next year.
On the other hand, the dollar is making new highs against the yen since mid-May. The earlier attempt to establish a foothold above JPY112 in Asia failed, but the surging interest rates (10-year Treasuries up 6 bp and Bunds up 12.5 bp) has weighed on the yen.
The euro is at its highest level since last April against the yen. The dollar appears to be breaking out of a bottoming pattern. This Great Graphic, made on Bloomberg, shows the near-term potential bottoming pattern and the Fibonacci retracements of the dollar's decline in H1. We identified the possible head and shoulder components and the measuring objective (~JPY115.50). The next retracement target (50%) is near JPY113.35 and (61.8%) JPY114.60. A break of JPY111.00 would warn of another failed attempt by the greenback, and would likely coincide with a setback in yields.
Disclaimer: Read more by Marc on his site Marc to Market.
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