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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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).
- 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.
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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% |
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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