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USD/JPY One-Month Highs Meet a Data Heavy Week for USD

USD/JPY One-Month Highs Meet a Data Heavy Week for USD

2017-05-01 15:30:00
Tyler Yell, CMT, Currency Strategist
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Can USD/JPY reverse its 2017 Trend? See our forecast to see what is driving the trends!

Talking Points:

  • USD/JPY technical strategy: favoring resistance at 112 holding as US data weakens
  • Golden Week holidays in Japan expected to leave order flow and liquidity light
  • FOMC & NFP week put focus on DXY’s ability to sustain push higher

When looking at USD/JPY, you may think that USD is beginning to turn things around. However, it’s possible by comparing it to other stronger currencies (GBP, EUR & CHF) that DXY possibly sees a retracement in a downtrend in the near future. The DXY has recently re-tested its 2017 low of ~98.70. When looking at USD/JPY, there are a few helpful technical and sentiment indicators we can keep an eye on to help us see what may be next for USD/JPY.

For traders who like moving averages, the 55-DMA (111.88) has been a helpful guide as to whether traders should hold a longer-term bullish or bearish bias. Currently, the price pushing into 55-DMA from below would argue that an inability to overcome the 55-DMA would favor a resumption of the downtrend.

When looking at USD/JPY, I also notice that we are moving into the top of Andrew’s Pitchfork that has framed price well as well as into Fibonacci 61.8% retracement resistance, which is a classic retracement point in a downtrend. Much like the 55-DMA, an inability for the price to close above these multiple forms of resistance would favor a continuation lower to likely new annual lows. Lastly, you can see below the price that RSI(5) is pushing into overbought territory as the price is pushing into multiple forms of downtrend resistance.

Traders can watch RSI to see if we get a momentum burst higher (deeper into overbought) alongside a break of resistance to signify a trend change. Conversely, if RSI(5) pushes back lower, we may be seeing a nice set-up to rejoin the downtrend that would likely be validated on a break below 110.

Join Tyler in his Daily Closing Bell webinars at 3 pm ET to discuss market developments.

USD/JPY One-Month Highs Meet a Data Heavy Week for USD

Chart Created by Tyler Yell, CMT

USD/JPY IG Trader Sentiment: US Dollar Trading Higher versus Yen - Reversal on Hand?

USD/JPY One-Month Highs Meet a Data Heavy Week for USD

What do retail traders’ buy/sell decisions hint about the JPY trend? Find out here!

USDJPY: As of Monday, May 1,IG retail trader data shows 56.9% of traders are net-long with the ratio of traders long to short at 1.32 to 1. In fact, traders have remained net-long since Jan 09 when USDJPY traded near 117.828; theprice has moved 5.4% lower since then. The number of traders net-long is 6.0% lower than yesterday and 25.0% lower from last week, while the number of traders net-short is 6.5% lower than yesterday and 68.5% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USDJPY prices may continue to fall. Positioning is more net-long than yesterday but less net-long from last week. The combination of current sentiment and recent changes gives us a further mixed USDJPY trading bias.(Emphasis Mine)

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Shorter-Term USD/JPY Technical Levels: Monday, May 1, 2017

For those interested in shorter-term levels of focus than the ones above, these levels signal important potential pivot levels over the next 48-hours.

USD/JPY One-Month Highs Meet a Data Heavy Week for USD

Written by Tyler Yell, CMT, Currency Analyst & Trading Instructor for DailyFX.com

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

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