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USD/JPY Retail Sentiment Hits Extreme Following Wait-and-See BoJ

USD/JPY Retail Sentiment Hits Extreme Following Wait-and-See BoJ

David Song, Strategist

Talking Points:

- USD/JPY Retail Sentiment Hits Fresh Near-Term Extreme Following Wait-and-See BoJ.

- USDOLLAR Pares Post-FOMC Losses; Outlook Mired by Waning Interest-Rate Expectations.

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USD/JPY Daily Chart

Chart - Created by David Song

  • USD/JPY extends the decline from earlier this week as the Bank of Japan (BoJ) preserves a wait-and-see approach in June, while risk appetite deteriorates, with the global benchmark equity indices under pressure; will continue to watch the downside targets especially as the Relative Strength Index (RSI) dips into oversold territory for the first time since April.
  • Despite lingering expectations for more BoJ easing, Governor Haruhiko Kuroda and Co. may retain the current policy at the next rate-decision on July 29 as the central bank continues to monitor the impact of the negative interest-rate policy (NIRP) on the real economy.
  • A closing price below the Fibonacci overlap around 104.80 (78.6% expansion) to 105.30 (50% retracement) may open up the next downside target around 103.20 (38.2% retracement), which is followed by 102.10 (100% expansion).
  • The DailyFX Speculative Sentiment Index (SSI) shows the retail sentiment has pushed to near-term extremes following the BoJ meeting, with the ratio working its way towards the +4.00 mark.
  • The ratio currently sits at +3.44 as 77% of traders are long, with long positions 9.1% higher from the previous week, while open interest stands 13.5% 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 Index11913.9611933.4611858.850.20145.08%
USDOLLAR Daily Chart

Chart - Created by David Song

Despite the limited market reaction to the mixed batch of U.S. data, the USDOLLAR appears to be carving a near-term top as amid the string of failed attempt to test the Fibonacci overlap around 11,951 (38.2% expansion) to 11,965 (23.6% retracement); will continue to watch the downside targets as the greenback largely preserves the bearish trend from earlier this year.

  • With the Federal Open Market Committee (FOMC) voting unanimously to retain its current policy in June, Fed Funds Futures now show a less than 10% probability for a rate-hike at the next rate decision on July 27 as central bank narrows its growth forecast and projects a more shallow path for interest rates.
  • Will keep a close eye on the downside targets, with a break/close below 11,836 (61.8% retracement) to 11,843 (38.2% retracement) raising the risk for a move back towards 11,745 (50% retracement) to 11,759 (23.6% retracement).
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Read More:

S&P 500: Confluence of Technical Events Bolsters Case for the Bears

US DOLLAR Technical Analysis: A Wild Open To June Is Set To Get Wilder

DailyFX Technical Focus: Flying Kiwi

NZD/USD: RBNZ Breakout Approaching Initial Resistance Targets

--- 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.