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USD/JPY Price Analysis: Will a Data Heavy End to the Week Spur USD?

USD/JPY Price Analysis: Will a Data Heavy End to the Week Spur USD?

Richard Snow, Markets Writer

USD/JPY Analysis:

  • USD/JPY rebounds from near-term low but remains on track for continued range bound moves in the absence of economic surprises
  • US Data is on the agenda as the week comes to a close. Eyes turn to initial jobless claims, ISM data and non-farm payrolls
  • Sentiment readings remain of interest around USD, as looked at below.

USD/JPY Ticks Up – General Price Action Forming a Range

Recent dollar strength seems to be more indicative of a temporary reprieve in the slide of the greenback than a genuine reversal of the downward trend, at least for now. The global reserve currency has experienced a considerable sell-off against its peers as the Federal Reserve continues to implement accommodative monetary policy in an attempt to reinvigorate the US economy.

Learn why monetary policy is important and how it affects the forex market

At his Jackson Hole address, Jerome Powell communicated an alteration to inflation targeting that allows for periods of inflation above the 2% target. Such policy can place downward pressure on the value of the dollar as interest rates are expected to remain low for the foreseeable future, and the Fed is not as constrained by the 2% inflation target as they were previously.

USD/JPY Long-Term View of Potential Headwinds

The weekly chart provides a picture of relatively volatile moves in the pair with a lean towards lower prices. The chart has a number of similarities to the daily chart in that the currency pair faces resistance to the upside. Weekly momentum remains below the 50 mark on the RSI indicating a lack of discernible near-term trend.

USD/JPY Weekly Chart: Lower Highs Exhibited over the Longer-Term

USDJPY Weekly Price Chart

Chart prepared by Richard Snow, IG

More recently, the US dollar has gained against the Japanese Yen after the shock announcement last Friday of the resignation of Japanese Prime Minister, Shinzo Abe, causing a sizeable drop in the USDJPY market when that news hit the wires.

The pair faces considerable resistance to the upside: First, the trendline resistance, and secondly, the upper bound of the developing range at 107.00. Continued dollar strength then brings into focus the 107.50 and 107.80 marks.

Should the bigger picture USD trend (weakness) continue, 106.35 becomes the next level of support before the lower bound of the developing range (105.35) comes into focus before the psych level of 105.00 and 104.80 levels come into consideration.

USD/JPY Daily Chart: Fair Amount of Resistance Ahead

USDJPY Daily Price Chart

Chart prepared by Richard Snow, IG

US Data (ISM, initial jobless claims and NFP)

There is a considerable amount of data today and tomorrow with potential market moving ability.

DailyFX Economic Calendar

For all market-moving data releases and events see the DailyFX Economic Calendar

Sentiment Data Hints at a Potential Decline in USD/JPY

USDJPY Sentiment
  • USD/JPY: Retail trader data (at time of writing) shows 62.51% of traders are net-long with the ratio of traders long to short at 1.67 to 1.
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USD/JPY prices may continue to fall.
  • The number of traders net-long is 14.38% higher than yesterday and 17.49% higher from last week, while the number of traders net-short is 6.53% lower than yesterday and 13.92% lower from last week.
  • Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes hints at a stronger USD/JPY-bearish contrarian trading bias.

--- Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX

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

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