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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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.
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USDOLLAR(Ticker: USDollar):
| Index | Last | High | Low | Daily Change (%) | Daily Range (% of ATR) |
|---|---|---|---|---|---|
| US Dollar Index | 11913.96 | 11933.46 | 11858.85 | 0.20 | 145.08% |
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
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NZD/USD: RBNZ Breakout Approaching Initial Resistance Targets
--- Written by David Song, Currency Analyst
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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