Talking Points
- USD/JPY holds a near-term consolidation pattern ahead of US GDP / Yellen
- Updated targets & invalidation levels
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USDJPY Daily
Technical Outlook: USDJPY has been trading within the confines of a broad descending pitchfork formation extending off the 2015 high with the pair rebounding off the lower median-line parallel last month. Although we’ve been marking some daily divergence into this recent low, the risk remains weighted to the downside while below resistance at the highlighted median-line confluence. The expected downward revision in U.S. 2Q GDP accompanied by fresh comments from Fed Chair Janet Yellen at the Jackson Hole Economic Symposium tomorrow may threaten the recent limits of the consolidation range and offer some guidance as to our near-term directional bias.
USDJPY 120min
Chart Created Using TradingView
Notes: The pair has been consolidating just above the July lows since the start of the week and we’ll be looking for a resolution heading into tomorrow’s event risk. Interim resistance stands with the weekly open at 100.77 with a breach above 101.16 / parallel resistance (red) needed to validate a near-term reversal higher. Such a scenario eyes subsequent topside resistance objectives at the monthly open (102.28), the 38.2% retracement at 102.60 & 103.54.
It’s worth noting that this trade has become increasingly one sided and from a trading standpoint, I would be looking for a washout to the downside before inevitably reversing higher. Interim support rests with the July low / weekly opening-range low at 99.94/99 backed by the August low at 99.54 and the Brexit / 2016 low at 98.79. More meaningful structural support rests just below the 98-handle. For the complete setup and to continue tracking this trade& more throughout the week- Subscribe to SB Trade Deskand take advantage of the DailyFX New Subscriber Discount.
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- A summary of the DailyFX Speculative Sentiment Index (SSI) shows traders are net long USDJPY- the ratio stands at +4.23 - bearish reading
- Yesterday the ratio was 4.32. Long positions are 0.3% higher than yesterday and 14.4% above levels seen last week.
- Open interest is 0.8% higher than yesterday and 27.3% above its monthly average.
- Current retail positioning keeps the focus lower for now
- With retail sentiment holding near 2016 extremes and 81% of traders net long USDJPY, the pair stands at risk for a potential short-squeeze, especially as we head into the close of August trade. That’s said, we’ll be on the lookout for a similar scenario as early July when the SSI registered the 2016 extreme as price marked a failed run on the Brexit low.
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Relevant Data Releases This Week
Other Setups in Play:
- EURUSD: Waiting for the Dip & Rip- Key Resistance at 1.1400
- Webinar: Sterling Crosses On the Offensive- Yellen to Steer the Dollar
- USDCAD in Free Fall: 9-Days Down Ahead of Canada CPI, Retail Sales
- AUDJPY into Fresh Monthly Lows Ahead of AU Employment
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---Written by Michael Boutros, Currency Strategist with DailyFX
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