USD/JPY Continues to Search for Support as Risk Appetite Abates

Talking Points:

USD/JPY Searches for Support as Risk Sentiment Abates; RSI Approaches Oversold Territory.

GBP/USD Struggles to Clear 1.2490 Hurdle Ahead of U.K. Retail Sales.

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USD/JPY Daily Chart

Chart – Created Using Trading View

  • USD/JPY grinds to a uninformed 2017-low of 110.75 as risk perspective continues to abate, with a span during risk for serve waste as it extends a array of reduce highs lows from a prior a week; gripping a tighten eye on a Relative Strength Index (RSI) for confirmation/conviction as a oscillator threatens a bullish arrangement carried over from a prior year and approaches oversold territory.
  • The Nikkei (JPN225) highlights a identical function as a benchmark equity index slips to uninformed monthly low (18,962) and appears to be on march to exam a 2017-low (18,638)going into Japan’s mercantile year-end; a change in marketplace function appears to be a flourishing thesis as a DAX (GER30) also gives behind a allege from progressing this month.
  • Despite a singular marketplace greeting to a Bank of Japan (BoJ) Minutes, a Yen might continue to lane risk perspective as Governor Haruhiko Kuroda and Co. lift out a Quantitative/Qualitative Easing (QQE) Program with Yield-Curve Control; nevertheless, a executive bank might come underneath increasing vigour to serve support a genuine economy as ‘a few members voiced a perspective that a rate of change in a CPI would not strech around 2 percent during a projection period,’ and a devious paths for financial process might continue to teach a long-term bullish opinion for USD/JPY as a Federal Open Market Committee (FOMC) pledges to serve normalize financial process in 2017.
  • Nevertheless, a new decrease in USD/JPY suggests a broader change in marketplace function is underway going into a final days of May, with a tighten subsequent a Fibonacci overlie around 111.30 (50% retracement) to 111.60 (38.2% retracement) lifting a risk for a pierce behind towards a subsequent downside segment of seductiveness around 109.40 (50% retracement) to 109.90 (78.6% expansion).


GBP/USD Daily Chart

Chart – Created Using Trading View

  • GBP/USD pares a allege from progressing this week, with a span during risk for serve waste as it struggles to transparent a Fibonacci overlie around 1.2460 (61.8% expansion) to 1.2490 (38.2% retracement); moreover, a new pickup in a RSI appears to be losing movement as a oscillator appears to be branch around from trendline resistance.
  • Despite forecasts for a 0.3% miscarry in U.K. Retail Sales, a marked enlargement in title and core inflation might corrupt disposable incomes generally as a Bank of England (BoE) expects private-sector expenditure ‘to delayed serve during a year forward as a tumble in argent fed by to aloft prices, shortening households’ purchasing power.
  • With that said, Kristin Forbes’ pull to lift a benchmark seductiveness rate by 25bp might destroy to bear fruit as officials disagree ‘pay expansion has remained subdued, while measures of acceleration expectations sojourn during levels broadly unchanging with a achievement of a acceleration target,’ and a infancy might continue to validate a wait-and-see proceed during a subsequent process assembly on May 11 as a U.K. skeleton to start a depart from a European Union (EU) on Mar 29.
  • A tighten subsequent a Fibonacci overlie around 112.40 (61.8% retracement) to 112.50 (38.2% retracement) raises a risk for another exam of a near-term support section around 111.30 (50% retracement) to 111.60 (38.2% retracement).

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  • Retail merchant information shows 74.5% of traders are net-long USD/JPY with a ratio of traders prolonged to brief during 2.92 to 1. In fact, traders have remained net-long given January 9 when USD/JPY traded nearby 116.304; cost has changed 4.5% reduce given then. The series of traders net-long is 11.7% aloft than yesterday and 5.7% aloft from final week, while a series of traders net-short is 10.1% reduce than yesterday and 26.5% reduce from final week.
  • Retail merchant information shows 48.4% of traders are net-long GBP/USD with a ratio of traders brief to prolonged during 1.07 to 1. The series of traders net-long is 8.2% reduce than yesterday and 33.2% reduce from final week, while a series of traders net-short is 12.9% aloft than yesterday and 70.1% aloft from final week.
  • The burst in net-short GBP/USD positions suggests a sell throng is looking for range-bound conditions to insist over a entrance days, while a decrease in net-short USD/JPY seductiveness could be attributed to month/quarter-end flows.

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— Written by David Song, Currency Analyst

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