As mentioned earlier here, the pressure is very much on the dollar right now as the technicals are starting to favour a more downside push for the pair. The break below 130.00 yesterday vindicates the downside momentum from the latter stages of last year, with there being little in the way of a further drop from hereon.
The next support region is seen at the May lows around 126.45-55 before we get to the key psychological level at 125.00 next.
As much as the US CPI data yesterday didn’t help the dollar, this isn’t just about that. The intensifying speculation of the BOJ potentially taking action or at least signaling some intent for that next week is what is helping to drive the move in the past two days in my view.
In other words, traders are anxious in case the BOJ delivers another surprise in back-to-back policy meetings.
In any case, the chart is doing the talking now and the break below 130.00 overnight certainly opens the scope for further downside pressure at the moment.
This article was written by Justin Low at www.forexlive.com.