USD/JPY at Risk for Major Washout as Traders Gear Up For BoJ, FOMC

2016-09-20 16:31:00 Michael Boutros

Talking Points

USDJPY at risk into BoJ / FOMC
Updated targets & invalidation levels

Technical Outlook: We’ve been tracking this setup on SB Trade Desk over the past few weeks and heading into key rate decisions from the Bank of Japan (BoJ) and the FOMC, the immediate risk remains lower in USDJPY. The pair has been trading within the confines of an ascending pitchfork formation off the August lows with the pair trading into the 61.8% line. A key Fibonacci support zone rests just lower at 101.36/43 where the 61.8% extension off the decline off the monthly high converges on the 61.8% retracement of the advance off the lows with the broader focus higher while above the lower median-line parallel (blue).

A breach above the highlighted median-line confluence at 102.80/90 would be needed to validate a reversal with such a scenario targeting subsequent objectives at the monthly open at 103.42/54, the 104-handle & 104.47. From a trading standpoint, heading into the releases I would be interested in fading a washout lower in the pair with 101.36/43 & 100.24/30 both areas of interest for exhaustion / long-triggers. For the complete setup and to continue tracking this trade & more throughout the week- Subscribe to SB Trade Desk.

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A summary of the DailyFX Speculative Sentiment Index (SSI) shows traders are net longUSDJPY- the ratio stands at 2.94 (75% of traders are long)- bearish reading
Long positions are 36.2% above levels seen last week while short positions are 21.4% higher over the same time period.
Open interest is 0.3% higher than yesterday and 4.0% above its monthly average.
Retail has been net-long since July 21st (day of the high) – The recent build up in long positions continues to highlight the downside risk heading into the next 24-hours. Note that each time SSI extended into an extreme read of 4.5 or higher, a near-term low was registered in price. As such, we’ll be looking for a continued build in long positioning on a move into support to suggest that a pair may be trying to bottom here.

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