Talking Points:
– USD/JPY Retail FX Remains Net-Long; Pair Marks First Oversold Reading Since 2013.
– EUR/USD Continues to Carve Bullish Formation Despite Bets for More Dovish ECB.
– USDOLLAR Continues to Search for Support- June Low (11,732) Up Next?
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USD/JPY
Chart – Created Using FXCM Marketscope 2.0
USD/JPY remains at risk for a further decline as the Japanese Yen benefits from the pickup in risk aversion; will continue to watch the downside targets as the Relative Strength Index (RSI) dips into oversold territory.
May see growing speculation for a further expansion of the Bank of Japan’s (BoJ) asset-purchase-program as the region’s Consumer Price Index (CPI) is expected to show a slowdown in price growth, while the care rate of inflation is expected to contract an annualized 0.2% in July.
Nevertheless, DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long USD/JPY since June8, with the ratio working its way back towards extremes as it climbs to 2.40 as 71% of traders are long.
EUR/USD
Topside targets remain favored for EUR/USD as it extends the advance from the previous week and continues to carve a series of higher highs & lows, while the RSI pushes into overbought territory.
Stronger exchange rate paired with weaker energy prices may encourage the European Central Bank (ECB) to adopt a more dovish tone at the September 3 policy meeting; may see President Mario Draghi open the door to further embark on the easing cycle.
Close above 1.1510 (50% retracement) to 1.1520 (61.8% expansion) may keep the EUR/USD on course to test the next topside objective around 1.1760 (61.8% retracement) to 1.1810 (38.2% retracement).
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USDOLLAR(Ticker: USDollar):
Index
Last
High
Low
Daily Change (%)
Daily Range (% of ATR)
DJ-FXCM Dollar Index
11842.46
11924.14
11792.49
-0.48
225.35%
Chart – Created Using FXCM Marketscope 2.0
Dow Jones-FXCM U.S. Dollar may continue to give back the rebound from May amid easing expectations for a September Fed rate hike; will favor a further decline should the RSI dip below 30 & push deeper into oversold.
Following the dovish FOMC Minutes, will keep a close eye on the central bank rhetoric coming out of the Fed’s Economic Symposium in Jackson Hole, Wyoming as market participants see less likelihood for a September liftoff.
Close below 11,826 (61.8% expansion) to 11,836 (38.2% retracement) may expose the next downside area of interest around 11,745 (50% retracement) to 11,759 (23.6% retracement).
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— Written by David Song, Currency Analyst
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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Source: Daily fx