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USD/JPY Retail Sentiment Hits Extreme Ahead of Japan BoP, GDP Report

USD/JPY Retail Sentiment Hits Extreme Ahead of Japan BoP, GDP Report

David Song, Strategist

Talking Points:

- USD/JPY Retail Sentiment Hits Extreme Ahead of Japan BoP, GDP Report.

- USDOLLAR to Mount Larger Recovery on More of the Same From Fed Chair Yellen.

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


USD/JPY Daily Chart

Chart - Created by David Song

  • USD/JPY stands at risk for a further decline as it appears to have made a failed attempt to test the April high (111.87) and preserves the downward trend from earlier this year; may continue to carve a near-term series of lower highs & lows especially as the Relative Strength Index (RSI) comes off of trendline resistance to preserve the bearish formation carried over from June 2015.
  • Even though Japan’s Balance of Payments (BoP) report is anticipated to show a narrowing current account & trade balance surplus, an upward revision in the final 1Q Gross Domestic Product (GDP) report may boost the appeal of the Yen as signs of a stronger-than-expected recovery limits the Bank of Japan’s (BoJ) scope to implement more non-standard measures.
  • Will keep a close eye on the downside targets as the bearish trend from earlier this year looks to reassert itself, with the next downside region of interest coming in around 105.30 (50% retracement) to 105.54 (2016 low), followed by 104.80.
  • The DailyFX Speculative Sentiment Index (SSI) shows the retail FX crowd remains net-long USD/JPY since the BoJ implemented 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 appears to be working its way back towards near-term extremes as it currently sits at +2.82 as 74% of traders are long, with long positions 41.6% higher from the previous week, while open interest stands 10.2% 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 Index11865.3211888.4611856.130.2276.04%
USDOLLAR Daily Chart

Chart - Created by David Song

  • The USDOLLAR pares the decline following the dismal Non-Farm Payrolls (NFP) report, with the greenback catching near-term support around 11,836 (61.8% retracement) to 11,843 (38.2% retracement); downside targets remain favored as Fed Funds Futures continue to highlight a less than 10% probability for a rate-hike at the June 15 interest-rate decision.
  • With Fed Chair Janet Yellen scheduled to speak later today, more of the same may prop up the greenback as the central bank head continues to prepare U.S. households and businesses for higher borrowing-costs, but a material shift in the monetary policy outlook may produce near-term headwinds for the dollar as market participants push out bets for the next rate-hike.
  • Break/close below the Fibonacci overlap around 11,836 (61.8% retracement) to 11,843 (38.2% retracement) may open up the next downside region of interest coming in around 11,745 (50% retracement) to 11,759 (23.6% 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.