USD/JPY Vulnerable Heading into FOMC- Key Support 103.45

2016-11-01 17:37:00

Michael Boutros,

Talking Points

USD/JPY vulnerable heading into FOMC rate decision
Immediate focus is lower sub 104.86
Updated targets & invalidation levels

USD/JPY 120min

Chart Created Using TradingView

Technical Outlook: The USDJPY rally failed just ahead of the May lows at 105.55 last week with the pair coming under pressure today in U.S. trade. Heading into tomorrow’s FOMC interest rate decision, the near-term risk remains tilted to the downside while below confluence resistance at 104.86.

A newly identified pitchfork off the highs highlights near-term support at 104.16 backed by a more significant confluence at 103.45. A break below 102.81 would be needed to shift the broader focus back to the short-side of the pair (bullish invalidation & area of interest for near-term exhaustion / long-entries). From a trading standpoint, I’m looking to fade strength into structural support where the USDJPY may look to mount a more significant counter-offensive. Keep in mind the central bank is widely expected to stand pat on monetary policy this month with Fed Fund Futures still pricing in a nearly 72% chance for an interest rate hike in December.

A summary of the DailyFX Speculative Sentiment Index (SSI) shows traders are net long USDJPY- the ratio stands at +1.41 (58% of traders are long)- bearish reading
Long positions are 1.7% above levels seen last week while short positions are 8.4% lower over the same time period.
Open interest is 5.0% lower than yesterday and 1.1% below its monthly average.
The current dynamic suggests that the near-term risk remains weighted to the downside and we’ll be looking for a build in short-exposure as the pair heads into support to suggest that the downside pressure is fading.

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