Never miss a story from David Song

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to David Song

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

Talking Points:

- USD/JPY Outlook Turns Bearish as BoJ Endorses ‘Yield Curve Control,’ Retail Positioning Remains Stretched.

- USDOLLAR Remains Stuck in Near-Term Holding Pattern; Outlook Mired by Lower Path for Fed Funds.

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

USD/JPY

USD/JPY Daily Chart

Chart - Created by David Song

  • The near-term outlook for USD/JPY is becoming increasingly bearish as the pair breaks down from the triangle/wedge formation carried over from the previous month, with the Relative Strength Index (RSI) highlighting a similar dynamic; the downward trend from earlier this year may reassert itself going into the last full-week of September as market participants mull the implications of the Bank of Japan’s (BoJ) ‘Quantitative and Qualitative Monetary Easing with Yield Curve Control;’ the move casts doubts on the efficacy of the negative-interest rate policy (NIRP) as the central bank keeps the benchmark interest rate unchanged.
  • Efforts by Governor Haruhiko Kuroda and Co. to overshoot the 2% target for price growth may help to anchor inflation-expectations as the central bank keeps the door open to further embark on its easing cycle, but the adjustment to the asset-purchase program may not prove enough to weaken the Yen as Japan remains a net-lender to the rest of the world.
  • Failure to preserve the holding pattern raises the risk for a further decline in USD/JPY, with a break of the August low (99.53) exposing the next downside area of interest coming in around 98.30 (38.2% & 78.6% retracements).
DailyFX SSI
  • The DailyFX Speculative Sentiment Index (SSI) shows the FX crowd has been net-long USD/JPY since July 21, with the ratio hitting a 2016-extreme during in August as it climbed to +5.28.
  • The ratio remains elevated as it sits at +4.45, with 82% of traders long, while retail long positions have climbed 69.5% from the previous week.
  • The SSI may continue to serve as a contrarian indicator as the retail crowd remains stuck on the wrong side of the market and fades the near-term strength in the Japanese Yen.

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

11916.87

11932.91

11899.38

-0.12

58.04%

USD/JPY Outlook Turns Bearish as BoJ Endorses ‘Yield Curve Control’USDOLLAR Daily Chart

Chart - Created by David Song

  • Even though the USDOLLAR largely preserves the triangle/wedge formation following the Federal Open Market Committee (FOMC) interest-rate decision, the greenback remains at risk of facing headwinds over the near to medium-term as central bank officials project a lower path for interest rates; seems as though the Fed will follow a similar path to 2015 amid the growing dissent within the central bank.
  • Indeed, Chair Janet Yellen argued November remains a ‘live meeting’ as Fed officials see a growing argument to raise the benchmark interest rate, but the committee may stick to the sidelines ahead of the U.S. Presidential election amid the uncertainty clouding the fiscal outlook.
  • Will continue to watch the monthly range as the USDOLLAR remains stuck within the triangle/wedge formation carried over from the summer months, with a break/close below 11,898 (50% retracement) to 11,914 (38.2% retracement) raising the risk for a move back towards 11,822 (23.6% retracement) to 11,843 (38.2% retracement).
DailyFX Calendar

Click Here for the DailyFX Calendar

Get our top trading opportunities of 2016 HERE

Read More:

S&P 500 Tech Update: Looking to Short-term Chart for Direction

Silver Prices: Triangle Morphs into Larger Version of Itself, Wait for the Break

Few US Data Pre-FOMC Keeps Markets on Edge

Weekly Trading Forecast: Fed and BoJ Rate Decisions, Brexit Fears Carry More than Currency Risks

--- Written by David Song, Currency Analyst

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

To be added to David's e-mail distribution list, please follow this link.