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USD/JPY Downside Targets on Radar Amid Growing Dissent at BoJ

USD/JPY Downside Targets on Radar Amid Growing Dissent at BoJ

David Song,

Talking Points:

- 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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USD/JPY Daily Chart

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.

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

USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
US Dollar Index11965.2211973.5211950.56-0.0262.00%
USDOLLAR Daily Chart

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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Read More:

US DOLLAR Technical Analysis: Another Monthly Opening Range Worth Watching

Gold Prices in Free Fall- Shorts at Risk into NFP

EUR/GBP Breakdown Eyes Critical Support at 7520

GBP/USD Successful Re-Test of Former Resistance Line

--- 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.