USD/JPY Extends Rebound from Channel Support; RSI Follows Suit

Talking Points:

Canadian Dollar Outperforms Even as BoC Tames Interest-Rate Expectations.

USD/JPY Extends Rebound from Channel Support; RSI Follows Suit.

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USD/CAD Daily Chart

Chart – Created Using Trading View

  • The Canadian dollar outperforms many of a vital counterparts even as Bank of Canada (BoC) Governor Stephen Poloz tames interest-rate expectations and warns normalizing financial process betimes would pull a economy behind into recession; a unsuccessful try to exam a Dec high (1.3599) might fuel a incomparable decrease in a sell rate as a Relative Strength Index (RSI) fails to safety a bullish arrangement from progressing this year.
  • The broader opinion for USD/CAD stays upheld by a ceiling trending channel carried over from a summer months, yet a new debility in a sell rate might accumulate gait going into Apr as a strength in a Canadian dollar appears to be accompanied by a pickup in crude; with oil prices trade behind above $50/bbl, a element miscarry in appetite prices might extent a BoC’s range to serve support a Canadian economy generally as ‘recent expenditure and housing indicators advise enlargement in a fourth entertain of 2016 might have been somewhat stronger than expected.’
  • With that said, Canada’s Gross Domestic Product (GDP) news might have a singular impact on a financial process opinion even yet a enlargement rate is approaching to delayed down to an annualized 1.9% in January, yet a core reading for U.S. Personal Consumption Expenditure (PCE) might moderate a seductiveness of a greenback as a Fed’s elite sign for acceleration is expected to reason solid during an annualized 1.7% for a third uninterrupted month in February.
  • In turn, a break/close subsequent a Fibonacci overlie around 1.3280 (50% retracement) to 1.3310 (38.2% retracement) might coax a run during a former-resistance section around 1.3210 (61.8% retracement), with a subsequent downside segment of seductiveness entrance in around 1.3100 (78.6% retracement).


USD/JPY Daily Chart

Chart – Created Using Trading View

  • USD/JPY might continue to retrace a decrease from progressing this month as a span comes off of channel support and breaks a new array of lower-highs lows; a Relative Strength Index (RSI) also highlights a identical energetic following a unsuccessful try to pull into oversold territory, yet a broader opinion for a dollar-yen sell rate stays slanted to a downside as cost a oscillator safety a bearish formations carried over from late-2016.
  • Waning interesting-rate expectations might keep a dollar-yen sell rate capped as Fed Fund Futures continue to cost a reduction than 60% luck for a Jun rate-hike, yet marketplace participants might compensate increasing courtesy to a comments from New York Fed President William Dudley, a permanent voting-member on a Federal Open Market Committee (FOMC), as executive bank officials still see range for 3 to 4 rate-hikes in 2017; a uninformed tongue might fuel a near-term miscarry in USD/JPY should Mr. Dudley uncover a incomparable eagerness to lift a benchmark seductiveness rate earlier rather than later.
  • With that said, a Nikkei (JPN225) appears to be trade during a identical connection as a benchmark equity index bounces behind from a monthly low of 18,867, and risk view might continue to change a near-term opinion for USD/JPY generally as a Bank of Japan (BoJ) pursues a Quantitative/Qualitative Easing (QQE) Program with Yield-Curve Control and keeps a doorway open to serve support a genuine economy.
  • Need a tighten above a Fibonacci overlie around 111.10 (61.8% expansion) to 111.60 (38.2% retracement) to preference a incomparable miscarry in a dollar-yen sell rate, with a subsequent topside jump entrance in around 112.40 (61.8% retracement) to 112.80 (38.2% expansion) followed by 113.80 (23.6% expansion) to 114.30 (23.6% retracement).

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  • The DailyFX Speculative Sentiment Index (SSI) shows sell positioning stays mostly unvaried for a Japanese Yen, with a throng net-long USD/JPY given January 9.
  • Retail merchant information shows 70.8% of traders are net-long USD/JPY with a ratio of traders prolonged to brief during 2.42 to 1. The series of traders net-long is 0.2% reduce than yesterday and 1.1% reduce from final week, while a series of traders net-short is 7.1% aloft than yesterday and 11.0% aloft from final week.
  • Retail merchant information shows 38.4% of traders are net-long USD/CAD with a ratio of traders brief to prolonged during 1.6 to 1. The series of traders net-long is 5.3% reduce than yesterday and 4.1% aloft from final week, while a series of traders net-short is 15.6% aloft than yesterday and 9.8% aloft from final week.

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— Written by David Song, Currency Analyst

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