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USD/JPY Risks Larger Pullback as Bull-Flag Formation Takes Shape

USD/JPY Risks Larger Pullback as Bull-Flag Formation Takes Shape

2015-11-12 17:50:00
David Song, Strategist
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Talking Points:

- USD/JPY Carves Bull-Flag Formation as Risk Appetite Falters.

- EUR/USD Rebound to Gather Pace on Strong Euro-Zone 3Q GDP Report.

- USDOLLAR Fails to Benefit From Upbeat Fed Rhetoric- Retail Sales, U. of Michigan in Focus.

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USD/JPY

USD/JPY Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Despite the weakness in the global benchmark equity indices, USD/JPY may mount a larger topside assault in the days ahead as a bull-flag formation appears to be taking shape, while the Relative Strength Index (RSI) preserves the bullish formation from August.
  • However, the dollar-yen may continue to consolidate ahead of the remaining interest rate decisions for 2015 as the Bank of Japan (BoJ) remains in no rush to further expand its asset-purchase program despite the weakening outlook for global growth.
  • The DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long USD/JPY since June 8, but the ratio appears to be working its way back towards recent extremes as it climbs to +1.41, with 58% of traders long.

EUR/USD

EUR/USD Daily Chart
  • Even though EUR/USD fails to hold the post-NFP low (1.0704), the pair may face a larger rebound over the next 24-hours of trade as the Euro-Zone’s 3Q Gross Domestic Product (GDP) report is expected to show the monetary union expanding an annualized 1.7% after growing 1.5% during the three-months through June.
  • Long-term outlook remains tilted to the downside especially as the RSI retains the bearish formation from August, but EUR/USD stands at risk for a bigger correction as the oscillator comes off of oversold territory.
  • Close above former support around 1.0790 (50% expansion) to 1.0800 (23.6% expansion) may open up the door for a run up to 1.0940 (61.8% retracement) to 1.0960 (23.6% retracement)

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Read More:

Price & Time: EUR/USD - To Bounce or Not To Bounce

EUR/JPY on the Cusp of Important Move

USD/JPY Technical Analysis: A Hold Above Support Favors Liftoff

USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

12147.95

12176.38

12137.51

-0.21

79.78%

USD/JPY Risks Larger Pullback as Bull-Flag Formation Takes ShapeUSDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Dow Jones-FXCM U.S. Dollar continues to pare the advance from the previous week even as St. Louis Fed President James Bullard and Atlanta Fed President Jeffrey Lacker endorse higher borrowing-costs; Fund Funds Futures shows market participants are still pricing a 66% probability for a December rate-hike.
  • With the holiday shopping season around the corner, a pickup in U.S. Retail Sales accompanied by a further improvement in the U. of Michigan Confidence survey may fuel bets for a 2015 liftoff as central bank officials turn increasingly upbeat towards the economy.
  • Topside targets around 12,273 (161.8% expansion) to 12.296 (100% expansion) remain on the radar, but will keep a close eye on the former-resistance zones around 12,049 (78.6% retracement) to 12,082 (61.8% expansion) to potential support.
USD/JPY Risks Larger Pullback as Bull-Flag Formation Takes Shape

--- Written by David Song, Currency Analyst

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

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