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USD/JPY Risks Larger Recovery; FX Sentiment Narrows From Extremes

USD/JPY Risks Larger Recovery; FX Sentiment Narrows From Extremes

2016-06-23 17:40:00
David Song, Strategist
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Talking Points:

- USD/JPY Mounts Larger Recovery; Retail Sentiment Narrows From Recent Extremes.

- USDOLLAR Continues to Search for Support Ahead of Durable Goods Orders Report.

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USD/JPY

USD/JPY Daily Chart

Chart - Created by David Song

  • USD/JPY may mount a larger recovery as it breaks out of the narrow range, with the Relative Strength Index (RSI) moving away from oversold territory, but the pair may continue to carve a longer-term series of lower highs & lower lows as price & the momentum indicator largely preserve the bearish formations carried over from the previous year.
  • The near-term recovery in USD/JPY accompanied by the pickup in risk sentiment may undermine speculation for a currency intervention, but the weakening outlook for global growth may continue to boost the appeal of the Yen especially as Japan returns to its historical role as a net-lender to the world economy.
  • With USD/JPY carving a lower-low in June, may see the rebound ultimately lead to a lower-high, with the first topside region of interest coming in around 106.20 (23.6% retracement) followed by 107.00 (61.8% expansion).
DailyFX SSI
  • The DailyFX Speculative Sentiment Index (SSI) shows the retail crowd remains net-long USD/JPY since the Bank of Japan (BoJ) introduced the negative interest-rate policy (NIRP) on January 29, with the ratio hitting an extreme earlier this month as it climbed towards +4.00.
  • The ratio currently sits at +3.41 as 77% of traders are long, with short positions 23.8% lower from the previous week as open interest stands 16.5% below 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):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

US Dollar Index

11725.70

11738.37

11689.84

-0.21

84.53%

USD/JPY Risks Larger Recovery; FX Sentiment Narrows From ExtremesUSDOLLAR Daily Chart

Chart - Created by David Song

  • The USDOLLAR stands at risk for a further decline as it struggles to find support at the Fibonacci overlap around 11,745 (50% retracement) to 11,759 (23.6% retracement); will continue to favor the downside targets as price & the RSI remain stuck within a bearish formation.
  • In light of the mixed data prints coming out of the U.S. economy, a 0.5% contraction in Durable Goods Orders may dampen the appeal of the greenback and drag on the interest-rate outlook as it undermines Fed expectations for a ‘consumer-led’ recovery.
  • Closing price below the Fibonacci overlap around 11,745 (50% retracement) to 11,759 (23.6% retracement) raises the risk for a more meaningful run at the next downside objective coming in around 11,623 (100% expansion) to 11,646 (61.8% retracement).
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Read More:

S&P 500: Crosses Important Short-term Resistance on Global Rally in Risk

USD/JPY Technical Analysis: A Return To USD/JPY Of 2008-2011?

EUR/USD Timing Compares Favorably with Early 2000s Base

EUR/USD: Breach of Weekly High to Fuel Reversal From Monthly Open

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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