USD/JPY At Risk of Falling Below 108.00 as US Dollar Continues to Slide
Key Talking Points:
- USD/JPY aiming at next Fibonacci level below 108.00
- USD selling pressure intensifies as bond yields retrace
A strong earnings season and falling yields are causing the US Dollar to slide even further, with the Dollar Basket about to slip below the 91 mark for the first time since March 3rd. The safe haven’s performance in the short-term is likely to continue underpinned by the behavior in yields, and with market participant’s now trusting the Fed’s message of unchanged policy in the foreseeable future, the weakness in the US Dollar could still last a while.
USD/JPY has been on a freefall since it reached a one-year high on March 31st, all the way from rejection at the 111.00 mark to the current support just above the 108.00 mark. The pair attempted to rebound after the losses seen last week but bullish attempts were halted at the 23.6% Fibonacci retracement level (108.996) from the 102.597 – 110.972 extension, which had acted as support the week prior.
Following its recent performance, if USD/JPY is able to break below the 108.00 level then increase focus will be on 38.2% Fibonacci level (107.773) as the next area of support. The aggressive selling pressure has been extended over the last few weeks so technical indicators are now showing clear signs of oversold conditions, which may dampen the Yen’s ability to gain further territory against the greenback.
If the 38.2% Fibonacci is broken then the next objective will be the 50% level at 106.784, with hardly any references for support between those levels other than the 107.00 mark. Otherwise, a break above 109.00 would cement a bullish recovery in the US Dollar and could see USD/JPY push towards the 20-day simple moving average at 109.655 and beyond.
Retail trader data shows 49.02% of traders are net-long with the ratio of traders short to long at 1.04 to 1. The number of traders net-long is unchanged than yesterday and 13.51% higher from last week, while the number of traders net-short is unchanged than yesterday and 14.01% lower from last week.
--- Written by Daniela Sabin Hathorn, Market Analyst
Follow Daniela on Twitter @HathornSabin
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.