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USD/JPY Retail Sentiment Back at Near-Term Extremes

USD/JPY Retail Sentiment Back at Near-Term Extremes

David Song, Strategist

Talking Points:

- USD/JPY Retail Sentiment Back at Near-Term Extreme as Range-Support Approaches.

- USDOLLAR Remains at Risk for Further Losses as Bearish Pattern Continues to Take Shape.

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USD/JPY Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • USD/JPY may continue to consolidate ahead of the Federal Reserve’s & the Bank of Japan’s (BoJ) interest rate decisions schedule for the week ahead following the failed test of the mid-February high (114.87); pair stands at risk for another run at the 2016 low (110.96) amid the failed attempts to close above 113.80 (100% expansion) to 114.00 (23.6% retracement).
  • Despite an upward revision in Japan’s 4Q Gross Domestic Product (GDP) report, still seeing speculation for additional BoJ easing following the surprise move to implement a negative-interest rate policy (NIRP); may see Governor Haruhiko Kuroda try to buy more time at the March 15 rate decision as Japanese lawmakers mull the sales-tax hike for 2017.
  • Will keep a close eye on the Relative Strength Index (RSI) as the oscillator pulls back towards trendline support; failure to retain the bullish formation may open up the next downside target coming in around 110.50 (61.8% expansion).
  • Despite the recent string of lower-highs, the DailyFX Speculative Sentiment Index (SSI) shows the retail FX crowd remains net-long USD/JPY since January 29, with the ratio hitting at extreme in February as it climbed towards the +3.00 region.
  • Retail sentiment appears to be moving back towards near-term extremes as it widens to +2.33, 70% of traders currently long as positions increased 15.6% from the previous week.

Why and how do we use the SSI in trading? View our video and download the free indicator here

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USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index12037.5212049.7712025.8-0.0145.56%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • The USDOLLAR may continue to give back the rebound from the February low (12,001) as it continues to carve a series of lower highs & lows, while the RSI appears to be forming a new bearish pattern.
  • Nevertheless, fresh comments from Fed Vice-Chair Stanley Fischer and Governor Lael Brainard suggest the Federal Open Market Committee (FOMC) will stay on course to further normalize monetary policy as central bank officials see the U.S. economy approaching ‘full-employment’ and remain confident in achieving the 2% inflation-target over the policy horizon.
  • With the new bearish formations taking shape, a break of the 2016 low (12,001) may trigger a run at the next downside targets around 11,986 (61.8% retracement) following by 11,965 (23.6% retracement).

Read More:

Another Big Test Awaits USD/CAD

DailyFX Technical Focus: Nikkei 225 at Resistance

USD/JPY Technical Analysis: The Core FX Pair In The Risk ParadigmUSDOLLAR: Key Levels to Know Heading into NFPs, March Open

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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.