No Dollar is an island; USD/JPY set to test 7-year highs

FXStreet (San Francisco) - No Dollar is an island, entire of itself. Every Dollar is a piece of the currency market. On Tuesday, the Dollar index rose to 13-month high and climbed against the GBP and the JPY, while it maintained levels versus the Euro.

The US Dollar was fueled by upbeat ISM manufacturing index and weak commodities prices. Risk appetite was present in the market despite more escalates in Russian/Ukraine conflict.

"USD/JPY was boosted by hopes that the BOJ will bring another round of aggressive quantitative ease and could delay its second installment of planned sales tax hikes next year," Jamie Coleman pointed out in a recent report. In the same framework, he affirmed in an interview with the FXroom, that the best trade right now was long USD/JPY with the 110.00 as a possibility.

The USD/JPY advanced for third day and it completed an over 150-pip advance from Friday's low at 103.60. Now the pair is trading above the 105.00 area with highs since January at 105.20. The next frontier will be 105.40, maximum since 2008.

On the other hand, the GBP/USD collapsed 150 pips in the day to break below the 1.6535 and price at lows since March 24 at 1.6465. "Technically, the short term picture shows indicators heading lower in extreme oversold levels, while 20 SMA maintains a strong bearish slope well above current price," Valeria Bednarik from FXStreet comments.

"The strong rejection from the daily descendant trend line coming from this year high towards new lows, suggests the bearish trend underway may remain healthy for longer than initially expected, eyeing midterm a test of 1.6250 price zone," she concludes.

Main headlines in the American session

United States Markit Manufacturing PMI up to 57.9 in August from previous 55.8

US July construction spending +1.8% vs +1.0% expected

US: ISM Manufacturing PMI hits 59 in August

US stocks open the week with mixed note; USD at multi-month highs