USD/JPY Overbought Signal Persists Ahead Of Fed Chairman Testimony


USD/JPY climbs to a fresh monthly-high (112.80) ahead of the semi-annual Humphrey-Hawkins testimony, with the dollar-yen exchange now at risk of making a run at the 2018-high (113.39) as it extends the series of higher highs & lows from earlier this week.

(Click on image to enlarge)

Image of daily change for major currencies


(Click on image to enlarge)

Image of daily change for USDJPY

Despite the growing threat of a trade war, recent comments from Chairman Powell suggest the Federal Open Market Committee (FOMC) will stay on course to further normalize monetary policy as the U.S. economy is in a ‘good place.’

In turn, Chairman Powell may continue to strike an upbeat tone in front of U.S. lawmakers as the central bank head pledges to ‘work in a strictly non-political way, based on detailed analysis,’ and a batch of hawkish comments is likely to boost the appeal of the greenback as the Fed appears to be on track to implement four rate-hikes in 2018.

(Click on image to enlarge)

Image of IG Client Sentiment for USDJPY

Keep in mind, the IG Client Sentiment report shows the retail crowd has remained net-short since June 28 when USD/JPY traded near the 110.50 area even though price has moved 1.9% higher since then.

It looks as though the swing in retail positioning will continue as the number of traders net-long is 5.2% lower than yesterday and 20.3% lower from last week, while the number of traders net-short is 5.0% higher than yesterday and 17.0% higher from the previous week. The recent shift in sentiment offers a contrarian view as retail traders appear to be going against the current trend and continue to boost their net-short exposure, with USD/JPY at risk of extending the recent rally as it continues to carve a series of higher highs & lows.

At the same time, recent developments in the Relative Strength Index (RSI) suggest the bullish momentum is gathering pace as the oscillator pushes deeper into overbought territory, and the dollar-yen exchange rate is likely to stay bid as long as the indicator holds above 70.

1 2
View single page >> |

Disclosure: Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment ...

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.


Leave a comment to automatically be entered into our contest to win a free Echo Show.