USD/JPY Downside Targets on Radar Amid Growing Dissent at BoJ
- USD/JPY Extends Decline Amid Growing Dissent at BoJ; Downside Targets on Radar.
- USDOLLAR Outlook Hinges on U.S. Job/Wage Growth.
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Chart - Created by David Song
- USD/JPY stands at risk for further losses as the downward trend from earlier this year appears to be reasserting itself, while the Relative Strength Index (RSI) preserves the bearish formation carried over from June 2015; further deterioration in market sentiment may keep the Yen bid especially as Japan returns to its historical role as a net-creditor to the global economy.
- With Prime Minister Shinzo Abe delaying the sales-tax hike, the Bank of Japan (BoJ) may largely endorse a wait-and-see approach at the June 16 interest-rate decision as there appears to be a growing rift within the central bank, with board member Takehiro Sato opposes a further reduction in the benchmark interest rate.
- Failure to retain the upward trend from the May low (105.54) may open up the downside targets, with a break/close below 107.90 (161.8% expansion) to 108.50 (61.8% expansion) raising the risk for a move back towards 107.00 (61.8% expansion).
- The DailyFX Speculative Sentiment Index (SSI) shows the FX crowd remains net-long USD/JPY since the BoJ introduce the negative-interest rate policy (NIRP) on January 29, with the ratio hitting an extreme back in April as it climbed to +3.50.
- The ratio currently sits at +2.03 as 67% of traders are long, with long positions 19.2% higher from the previous week, while open interest stands 3.2% above the monthly average.
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|Index||Last||High||Low||Daily Change (%)||Daily Range (% of ATR)|
|US Dollar Index||11965.22||11973.52||11950.56||-0.02||62.00%|
Chart - Created by David Song
- The USDOLLAR may continue to give back the advance from the previous month as the mixed data prints coming out of the U.S. economy drag on interest-rate expectations, with Fed Funds Futures still highlighting a less than 40% probability for a rate-hike at the next rate decision on June 15.
- Even though the ADP Employment was largely in-line with market expectations, with private-payrolls increasing 173K in in May, another 160K expansion in U.S. Non-Farm Payrolls (NFP) accompanied by a downtick in the jobless rate may fail to boost interest-rate expectations as Average Hourly Earnings are anticipated to hold steady at an annualized 2.5% during the same period.
- The failed attempts to clear the 100-Day SMA (11,998) may highlight a near-term exhaustion in the USDOLLAR, with the first downside area of interest coming in around 11,898 (50% retracement).
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--- Written by David Song, Currency Analyst
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