18.10.2021: USD may regain momentum; outlook for USD, USD/JPY, AUD/USD

The new trading week has just kicked off. Market participants are widely expecting the Fed to tighten monetary policy. The regulator’s decision is sure to affect the trajectory of the US dollar index and many other currency pairs traded in the Asian session.
Industrial production in China showed an increase albeit smaller than expected. The indicator turned out to be noticeably weaker than the readings of the whole year. This decline is likely to affect countries that have close trading ties with China.
Today, the US dollar index is gaining momentum amid expectations that the Fed may tighten monetary policy. Now, it is trading at the level of 94.15. Yet, at the end of the day, its quotes may rise to 94.30. Besides, analysts believe that the greenback may strengthen given the inflation report revealed last week. Its bullish momentum may also be facilitated by expectations of the key rate hike. Currently, even more market participants are betting on it, especially after the FOMC September meeting, as well as continuing inflation pressure.
The dollar/yen pair reached the target level of 114.25. If it consolidates above this level, it may even approach the target range between 115 and 116. However, technical indicators are showing a reversal. It may occur if the price slips into a correction and fixes below the level of 113.5. The odds of a decline are 60% and 40% of further growth. So, it is better to wait for the first breakout signal in a certain direction and then choose a trading strategy.
The Australian dollar held its rise near the target level of 0.7445. Technical indicators signal a downward reversal. So, it may enter the correctional phase before further growth. Probably, the resistance level of 0.7445 is strong enough for the pair now and the entire October rally has already been exhausted. For this reason, the pair needs time to regain ground before breaking through this resistance level. A temporary decline from the level of 0.7395 to 0.7370 may occur soon.
To sum up, in September, the Fed hinted at an increase in the interest rate in the following year. The regulator also mentioned that it could start tapering bond purchases this year. In the September meeting minutes, it said it may begin the reduction of the QE program this year and complete it by mid-2022. If so, the US dollar will flex muscles. Such a scenario will also have an impact on its counter currencies and other assets.
00:00 Intro
00:21 China’s Industrial Production
00:40 USDX
01:21 USD/JPY
01:58 AUD/USD
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