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Forex snapshot

The US dollar is still enjoying support, helped on its way by a consumer confidence update that adds strength to the idea of an improving US economy.

Yen and dollar currency
Source: Bloomberg

Overbought conditions might hold back USD/JPY, but in the longer-term the rally here is still intact.

USD/JPY could reach ¥105

With the ¥104 level breached there seems room for further upside in this currency pair, although it is still sharply overbought according to the daily relative strength index.

Attempts today to push the dollar down versus the yen have come to nought, as the meeting between the Russian and Ukrainian presidents went by relatively uneventfully. Meanwhile, a strong reading on US consumer confidence, which saw the index touch levels not seen since October 2007, gave extra impetus to the dollar.

Looking into the rest of the week, US data remains sparse tomorrow, but jobless claims and a first revision to the GDP reading will provide some important points to look out for. Further gains to the upside would bring us within striking distance of ¥105, with the peak for the year around ¥105.40 just beyond that. The ¥103.70 level on the downside should provide support. 

USD/JPY chart

USD/CAD could find support at 200-DMA

This currency pair has weakened following the Burger King/Tim Hortons merger, knocking it back below the rising trendline from the C$1.0630 level.

For now, C$1.1000 is the level that needs to be broken if USD/CAD is to maintain its rally. US economic news will continue to predominate, but with Janet Yellen having given little away at the Jackson Hole meeting last week a stronger dollar remains the default scenario. A drop through C$1.0900 would signal a more extended period of weakness, although the 200-day moving average is just beyond this at C$1.0890 and may well act as powerful support, as was the case in the middle of August.

USD/CAD chart

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