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USD/JPY RSI Sits in Oversold Territory, Retail FX Remains Net-Long

USD/JPY RSI Sits in Oversold Territory, Retail FX Remains Net-Long

Talking Points:

- USD/JPY RSI Sits in Oversold Territory While Retail FX Remains Net-Long.

- SPX500 Continues to Carve Bearish Pattern Going Into U.S. Earnings Season.

- USDOLLAR to Threaten Range on Strong NFP, Faster Wage Growth.

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USD/JPY Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • USD/JPY stands at risk for a larger decline as the pair continues to carve lower lows while the Relative Strength Index (RSI) preserves the bearish formation from back in November but, the oscillator may highlight a near-term exhaustion as it holds above the August low (20).
  • Nevertheless, the dollar-yen remains at risk of giving back the rebound from 116.07 should Japan’s Balance of Payments (BoP) report instill an improved outlook for the region and encourage the Bank of Japan (BoJ) to endorse a wait-and-see approach at the January 29 interest rate decision as Governor Haruhiko Kuroda remains confident in achieving the 2% inflation target over the policy horizon.
  • The DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long USD/JPY since December 2 but, the ratio continues to come off of recent extremes as it narrows to +2.26, with 69% of traders now long.


SPX500 Daily Chart
  • Even though the SPX500 rebounds from the overnight low, the series of lower highs & lows may continue to take shape over the coming days especially as the RSI pushes into oversold territory; may see a near-term rebound should the oscillator climb back above 30.
  • With U.S. firms announcing 4Q earnings this week, concerns surrounding the appreciation in the U.S. dollar may be a key theme to watch as market participants weigh the timing of the next Fed rate-hike.
  • The bearish formations in price & RSI may trigger a further decline, with the September low (1,870) and the August low (1,833) in focus.

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USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index12191.6812202.4912181.23-0.0657.68%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Despite the 292K expansion in U.S. Non-Farm Payrolls (NFPS), the failed attempt to break out of the near-term range may spur a pullback in the USDOLLAR as it sits at resistance.
  • Will keep a close eye on the U.S. Advance Retail Sales report as private-sector consumption remains one of the leading drivers of growth and inflation but, the fresh updates from the Fed’s Beige Book may dampen the appeal of the dollar should the regional banks highlight subdued price growth across the 12 districts.
  • A near-term correction may spur a move back towards support around 12,049 (78.6% retracement) to 12,082 (61.8% expansion).

Read More:

Price & Time: NZD/USD: Starting Down or Bullish Backtest?

Bearish EURUSD: Eyeing New 2016 Lows

USD/JPY Eyes August Low- Widening Surplus to Keep BoJ on Hold?

EUR/USD Short-Term Strategy: Sell Rips Sub-1.0880

Avoid the pitfalls of trading by steering clear of classic mistakes. Review these principles in the "Traits of Successful Traders" series.

--- Written by David Song, Currency Analyst

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

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