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USD/JPY Risks Fresh 2015 Lows; Retail FX Remains Net-Long

USD/JPY Risks Fresh 2015 Lows; Retail FX Remains Net-Long

David Song, Strategist

Talking Points:

- USD/JPY Retail FX Remains Net-Long; Pair Marks First Oversold Reading Since 2013.

- EUR/USD Continues to Carve Bullish Formation Despite Bets for More Dovish ECB.

- USDOLLAR Continues to Search for Support- June Low (11,732) Up Next?

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USD/JPY Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • USD/JPY remains at risk for a further decline as the Japanese Yen benefits from the pickup in risk aversion; will continue to watch the downside targets as the Relative Strength Index (RSI) dips into oversold territory.
  • May see growing speculation for a further expansion of the Bank of Japan’s (BoJ) asset-purchase-program as the region’s Consumer Price Index (CPI) is expected to show a slowdown in price growth, while the care rate of inflation is expected to contract an annualized 0.2% in July.
  • Nevertheless, DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long USD/JPY since June8, with the ratio working its way back towards extremes as it climbs to 2.40 as 71% of traders are long.


EUR/USD Daily Chart
  • Topside targets remain favored for EUR/USD as it extends the advance from the previous week and continues to carve a series of higher highs & lows, while the RSI pushes into overbought territory.
  • Stronger exchange rate paired with weaker energy prices may encourage the European Central Bank (ECB) to adopt a more dovish tone at the September 3 policy meeting; may see President Mario Draghi open the door to further embark on the easing cycle.
  • Close above 1.1510 (50% retracement) to 1.1520 (61.8% expansion) may keep the EUR/USD on course to test the next topside objective around 1.1760 (61.8% retracement) to 1.1810 (38.2% retracement).

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USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index11842.4611924.1411792.49-0.48225.35%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Dow Jones-FXCM U.S. Dollar may continue to give back the rebound from May amid easing expectations for a September Fed rate hike; will favor a further decline should the RSI dip below 30 & push deeper into oversold.
  • Following the dovish FOMC Minutes, will keep a close eye on the central bank rhetoric coming out of the Fed’s Economic Symposium in Jackson Hole, Wyoming as market participants see less likelihood for a September liftoff.
  • Close below 11,826 (61.8% expansion) to 11,836 (38.2% retracement) may expose the next downside area of interest around 11,745 (50% retracement) to 11,759 (23.6% retracement).

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--- Written by David Song, Currency Analyst

To contact David, e-mail Follow me on Twitter at @DavidJSong.

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