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USD/JPY Marks Oversold Signal Ahead of G20- Retail FX Remains Long

USD/JPY Marks Oversold Signal Ahead of G20- Retail FX Remains Long

David Song,

Talking Points:

- Retail FX Remains Net-Long USD/JPY as Pair Extends Decline to Trigger Oversold Signal.

- USDOLLAR Falls Back From Fresh Weekly High as Mixed U.S. Data Persists.

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USD/JPY Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • USD/JPY has triggered an oversold signal as the Relative Strength Index (RSI) dips below 30, but the pair stands at risk for a further decline especially if the oscillator makes its way back towards the lows from earlier this year.
  • With hopes of seeing a meaningful announcement at the Group of 20 meeting in Shanghai, market sentiment may deteriorate further in the days ahead should the community of global central bankers & finance ministers struggle to meet on common ground.
  • Will keep a close eye on the downside targets as the RSI pushes back into oversold territory, with the next key region of interest coming in around 110.50 (61.8% expansion) followed by 109.50 (50% expansion).
  • Despite the near-term decline in the exchange rate, the DailyFX Speculative Sentiment Index (SSI) shows the retail FX crowd has been net-long USD/JPY since January 29, with the ratio hitting an extreme earlier this month as it climbed to +3.00.
  • The retail crowd appears to be fading the near-term decline in USD/JPY as long positions are 12.4% higher from the previous week, with the ratio working its way back towards recent extremes as it climbs to +2.26.

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USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index12126.6912159.612114.240.0673.21%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • The USDOLLAR falls back from a fresh weekly high of 12,158 as the data prints coming out of the world’s largest economy continue to highlight a mixed outlook for growth & inflation, but the bullish break on the RSI may foreshadow a larger advance over the days ahead as the greenback climbs out of the recent range and tests the 50-Day SMA (12,157).
  • Despite signs of a slowing recovery, recent comments from Richmond Fed President Jeffrey Lacker suggest the Federal Open Market Committee (FOMC) remains on course to implement higher borrowing-costs in 2016 as central bank officials remain upbeat on the economy and look for a ‘consumer-led’ recovery.
  • With the RSI breaking out of the bearish formation from earlier this year, topside targets remain in focus with the next region of interest coming in around 12,176 (78.6% expansion) to the 12,200 pivot.

Read More:

US Dollar – Where the Rubber Meets the Road?

EUR/USD – Bullish Views Getting Put to the Test

S&P 500 – Symmetry Rules

Constructive Copper Pattern adds to AUD/USD Intrigue

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