U.S. Dollar Tests New Lows Against Japanese Yen: Analysis For EUR/USD, GBP/USD, USD/CAD, USD/JPY

U.S. Dollar Retreats On Labor Day

U.S. Dollar Index is losing ground in absence of major economic news due to Labor Day in the U.S.

The nearest support level for U.S. Dollar Index is located in the 98.60 – 98.75 range. In case U.S. Dollar Index manages to settle below the 98.60 level, it will head towards the next support at 97.70 – 97.85. RSI is in the moderate territory, so there is plenty of room to gain additional downside momentum in the near term.

I believe that traders should watch the movements of the Japanese yen closely (more on this later) to determine whether U.S. Dollar Index has a good chance to test new lows this week.

EUR/USD Moves Higher As Traders Weigh Election Results In Germany’s Saxony-Anhalt

EUR/USD gained some ground despite the disappointing Industrial Production report from Germany. The report showed that Industrial Production decreased by -1.1% month-over-month in July, compared to analyst forecast of +0.1%.

Traders also focused on the results of elections in Germany’s Saxony-Anhalt, which ended in a massive win for the anti-immigration Alternative for Germany. The AfD party reached its best result ever, raising worries about its potential success at a federal level.

AfD’s victory in Saxony-Anhalt is a big deal for Germany’s political scene, but I do not think that it will have a material impact on the dynamics of the European currency in the near term. That said, political shifts in Europe are always worth watching.

In case EUR/USD stays above the 1.1615 level, it will head towards the next resistance level, which is located in the 1.1685 – 1.1700 range.

GBP/USD Tests Resistance At 1.3550 – 1.3565

GBP/USD has also moved higher as traders focused on general weakness of the American currency and reacted to Lloyds House Price Index report from the UK. The report showed that house prices decreased by -0.4% year-over-year in August, compared to analyst forecast of +0.1%. The weakness of the housing market did not put any pressure on the British pound in today’s trading session.

Currently, GBP/USD is trying to settle above the resistance level at 1.3550 – 1.3565. If GBP/USD manages to climb above the 1.3565 level, it will head towards the next resistance at 1.3635 – 1.3650.

USD/CAD Pulls Back Amid Rising Demand For Commodity-Related Currencies

USD/CAD is moving lower as traders focus on the continuation of the rally in the oil markets. Other commodity-related currencies gain ground in today’s trading session.

From the technical point of view, USD/CAD failed to settle above the resistance at 1.3825 – 1.3840 and pulled back towards the 1.3800 level. In case USD/CAD declines below 1.3800, it will head towards the nearest support, which is located in the 1.3750 – 1.3765 range.

USD/JPY Is Under Pressure As Traders Bet That BoJ Will Raise Rates

USD/JPY tests new lows as traders bet on a rate hike from the Bank of Japan. Perhaps, BoJ is selling dollars again to support the yen, although there is no official confirmation of the potential intervention.

Recent data suggests that Japan’s foreign reserves dropped from $1.287 trillion in July to $1.207 trillion in August. Thus, the country has already spent $80 billion to intervene in the forex market.

USD/JPY attempts to settle below the support level at 155.00 – 155.50. In case USD/JPY stays below the 155.00 level, it willl head towards the next support at 152.50 – 153.00. I’d note that RSI is in the oversold territory, but it remains well above recent lows. Thus, there is enough room to gain additional downside momentum in the near term.

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