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USD/JPY Range at Risk as Retail FX Sentiment Comes Off Extremes

USD/JPY Range at Risk as Retail FX Sentiment Comes Off Extremes

Michael Boutros, Strategist

Talking Points

  • USD/JPY near-term technicals keep focus higher into U.S. Retail Sales
  • Updated targets & invalidation levels

USDJPY 120min

USD/JPY Range at Risk as Retail FX Sentiment Comes Off Extremes

Chart Created Using TradingView

Technical Outlook: I highlighted this setup yesterday on my analyst pick – It’s too soon to tell, but a newly identified median-line off the lows could be in play here. Focus remains unchanged, “expect to see some consolidation but broadly looking for a break of the monthly opening-range, which as of now consists of the 8/2 daily candle (100.68 – 102.83/94).Initial resistance is eyed at the monthly open 102.28 with a breach above median-line resistance around ~103.55 needed to validate a more significant reversal in the pair. Subsequent resistance objectives eyed at 104.09/17 & 104.89.

Key support & bullish invalidation stands with the July low-day close at 100.57 with a break below this level risking a decline towards support targets at the July low at 99.99 & the Brexit lows at 98.79. From a trading standpoint, heading into the release I would be looking to fade weakness while within this near-term formation. For the complete setup and to continue tracking this trade& more throughout the week- Subscribe to SB Trade Deskand take advantage of the DailyFX New Subscriber Discount.

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USD/JPY Range at Risk as Retail FX Sentiment Comes Off Extremes
  • A summary of the DailyFX Speculative Sentiment Index (SSI)shows traders are net long USDJPY- the ratio stands at +3.85(79% of traders are long)-bearishreading
  • Yesterday the ratio was +3.89. Long positions are 3.8% lower than yesterday and 6.0% below levels seen last week
  • Open interest is 3.6% lower than yesterday and 8.9% above its monthly average
  • Nothing new to add beyond yesterday’s observations- Risk remains for a rebound higher as SSI comes off recent extremes- “Keep in mind that SSI stretched into an extreme read of +4.5 as USDJPY rebounded off the August low. The last time SSI was at this extreme was on 7/8, which marked the 2016 low-close. From a trading standpoint, I would be looking to fade weakness into structural support.”

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Relevant Data Releases This Week

USD/JPY Range at Risk as Retail FX Sentiment Comes Off Extremes

Other Setups in Play:

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---Written by Michael Boutros, Currency Strategist with DailyFX

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.