News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
Wall Street
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
More View more
Real Time News
  • The Federal Reserve System (the Fed) was founded in 1913 by the United States Congress. The Fed’s actions and policies have a major impact on currency value, affecting many trades involving the US Dollar. Learn more about the Fed here: https://t.co/ADSC4sIHrP https://t.co/eaA8ZI6DVu
  • Chinese property development company Sinic Holdings (2103) - Down 87%...@DailyFXTeam #contagion #Evergrande https://t.co/h5mfwqGASZ
  • 🇪🇸 Balance of Trade (JUL) Actual: €-1.60B Previous: €-0.98B https://www.dailyfx.com/economic-calendar#2021-09-20
  • Heads Up:🇪🇸 Balance of Trade (JUL) due at 08:00 GMT (15min) Previous: €-0.98B https://www.dailyfx.com/economic-calendar#2021-09-20
  • Fitch on China Property Developers - View will turn negative if sales in H2 21 fall below that achieved in H2 19 and/or if sharp fall follows through to H1 22 - Government policies in sector remain tight and show no sign of imminent loosening
  • Slippage can be a common occurrence in forex trading but is often misunderstood. Understanding how forex slippage occurs can enable a trader to minimize negative slippage, while potentially maximizing positive slippage. Learn about FX slippage here: https://t.co/Blrl0uF2Ct https://t.co/B0Y3XJhkRS
  • Key levels in forex tend to draw attention to traders in the market. These are psychological prices which tie into the human psyche and way of thinking. Learn about psychological levels here: https://t.co/8A1QhwMVKo https://t.co/1xhewkdV21
  • (USD Weekly Tech) US Dollar Dominant Uptrend Back In Focus: EUR/USD, USD/JPY, NZD/USD, USD/CHF https://www.dailyfx.com/forex/technical/article/special_report/2021/09/20/US-Dollar-Dominant-Uptrend-Back-In-Focus-EURUSD-USDJPY-NZDUSD-USDCHF.html?CHID=9&QPID=917702&utm_source=Twitter&utm_medium=Dubrovsky&utm_campaign=twr https://t.co/IpwzBGCi7P
  • What is your forex trading style? Take the quiz and find out: https://t.co/YY3ePTpzSI https://t.co/qv8keXFzHZ
  • Join @IlyaSpivak at 22:00 EST/2:00 GMT for his cross-market weekly outlook webinar. Register here: https://t.co/MKGHc9ae64 https://t.co/JMlT0Wn3DK
USD/JPY Pullback Stalls as More Fed Officials Strike Hawkish Tone

USD/JPY Pullback Stalls as More Fed Officials Strike Hawkish Tone

David Song, Strategist

Japanese Yen Talking Points

USD/JPY consolidates after trading to a fresh yearly high (111.12) during the previous week, but developments coming out of the US may keep the exchange rate afloat ahead of the Non-Farm Payrolls (NFP) report as a growing number of Federal Reserve officials show a greater willingness to switch gears.

Advertisement

USD/JPY Pullback Stalls as More Fed Officials Strike Hawkish Tone

USD/JPY attempts to halt a three day losing streak as it bounces back from a fresh weekly low (110.45), and the exchange rate may retrace the decline from the previous week as the NFP report is anticipated to show the US economy adding 690K jobs in June.

Image of DailyFX economic calendar for US

A further improvement in the labor market may put pressure on the Federal Open Market Committee (FOMC) to discuss an exit strategy over the coming months as Richmond Fed President Thomas Barkin, who votes on the FOMC this year, emphasizes “that we have had substantial further progress on the Fed’s inflation goal” while speaking at the Rotary Club of Atlanta.

In turn, Barkin acknowledged that the FOMC may achieve its policy targets “in short order” amid the ongoing improvement in the labor market, with the official going onto say that “I think you will see the workforce expand again in September with kids back in school.”

The comments largely align with the recent speech by Boston Fed President Eric Rosengren as the 2022 voting member on the FOMC insists that “it’s certainly time to start thinking about how quickly is it appropriate to remove accommodation,” and it remains to be seen if Chairman Jerome Powell and Co. will adjust the forward guidance at the next interest rate decision on July 28 as the central bank forecasts two rate hikes for 2023.

Until then, developments coming out of the US may keep USD/JPY afloat as Fed officials adopt a hawkish tone, but a further appreciation in the exchange rate may fuel the recent flip in retail sentiment like the behavior seen earlier this year.

Image of IG Client Sentiment for USD/JPY rate

The IG Client Sentiment report shows 41.43% of traders are currently net-long USD/JPY, with the ratio of traders short to long standing at 1.41 to 1.

The number of traders net-long is 4.90% higher than yesterday and 7.45% lower from last week, while the number of traders net-short is 2.12% lower than yesterday and 16.76% higher from last week. The decline in net-long position comes as USD/JPY consolidates after trading to a fresh yearly high (111.12) during the previous week, while the rise in net-short interest has fueled the tilt in retail sentiment as 47.04% of traders were net-long the pair last week.

With that said, a further appreciation in USD/JPY may fuel the recent flip in retail sentiment to largely mimic the behavior from earlier this year, and the pullback from the yearly high (111.12) may turn out to be a mere correction in the broader trend as the Relative Strength Index (RSI) continues to track the bullish formation established in April.

USD/JPY Rate Daily Chart

Image of USD/JPY rate daily chart

Source: Trading View

  • USD/JPY approached pre-pandemic levels as a ‘golden cross’ materialized in March, with a bull flag formation unfolding during the same period as the exchange rate traded to a fresh yearly high (110.97).
  • The Relative Strength Index (RSI) showed a similar dynamic as the indicator climbed above 70 for the first time since February 2020, but the pullback from overbought territory has negated the upward trend from this year, which pushed USD/JPY below the 50-Day SMA (109.42) for the first time since January.
  • Nevertheless, USD/JPY reversed ahead of the March low (106.37) to largely negate the threat of a head-and shoulders formation, with the exchange rate climbing back above the moving average to trade to a fresh yearly high (111.12) in June.
  • USD/JPY attempts to halt a three day losing streak as the RSI continues to track the upward trend from earlier this year, but need a break/close above the Fibonacci overlap around 111.10 (61.8% expansion) to 111.60 (38.2% retracement) to open up the February 2020 high (112.23).
  • Next area of interest comes in around 112.40 (61.8% retracement) to 112.80 (38.2% expansion), but lack of momentum to clear the Fibonacci overlap around 111.10 (61.8% expansion) to 111.60 (38.2% retracement) may bring the 109.40 (50% retracement) to 110.00 (78.6% expansion) region back on the radar, which largely lines up with the 50-Day SMA (109.42).

--- Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES