After Friday’s not-as-bad-as-it-appeared NFP report, traders were optimistic that we would see risk sentiment return with Chinese markets on holiday this week, but so far those hopes have not been realized. It’s been an ugly start to the week for so-called “risk assets,†with global stocks, oil, and high-yield bonds all on the back foot at the start of the US session.
Beyond oil, one of the best indicators of global trader sentiment has been USD/JPY which is, not surprisingly, falling for the 6th consecutive day. On a technical basis, there’s strong support at the 116.00 level (from 116.25 as of writing) that buyers have defended repeatedly over the last 14 months. On each of the previous four occasions, the pair has surged by over 500 pips after testing this support zone, so there is certainly some ground for optimism among the bulls.
That said, the secondary indicators are hardly giving a strong bullish signal: the MACD has already rolled over and is once again trending lower below both its signal line and the “0†level, whereas the RSI indicator is not yet in oversold territory (where it was on the previous two rallies off 116.00 support).
From a fundamental perspective, there’s not much in the way of top-tier news releases in the early part of this week, and with the aforementioned Chinese holiday in play, we wouldn’t be surprised if USD/JPY consolidates above the 116.00 support level for a bit.
That said, if sentiment continues to sour or if we see negative US news from Fed Chair Janet Yellen’s Humphrey-Hawkins testimony (Wednesday and Thursday) or Retail Sales (Friday), that floor could quickly give way. In that case, the next major support level is all the way down around 114.00 which represents the 23.6% Fibonacci retracement of the entire 2011-2015 rally. Even if we do see a short-term bounce from this floor, medium- and longer-term traders will likely remain skeptical of the move below last week’s high at 121.00.
This research is for informational purposes and should not be construed as personal advice. Trading any financial market involves risk. Trading on leverage involves risk of losses greater than deposits.
Recommended Content
Editors’ Picks
EUR/USD holds below 1.0750 ahead of key US data
EUR/USD trades in a tight range below 1.0750 in the European session on Friday. The US Dollar struggles to gather strength ahead of key PCE Price Index data, the Fed's preferred gauge of inflation, and helps the pair hold its ground.
USD/JPY stays firm above 156.00 after BoJ Governor Ueda's comments
USD/JPY stays firm above 156.00 after surging above this level on the Bank of Japan's decision to leave the policy settings unchanged. BoJ Governor said weak Yen was not impacting prices but added that they will watch FX developments closely.
Gold price oscillates in a range as the focus remains glued to the US PCE Price Index
Gold price struggles to attract any meaningful buyers amid the emergence of fresh USD buying. Bets that the Fed will keep rates higher for longer amid sticky inflation help revive the USD demand.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
US core PCE inflation set to signal firm price pressures as markets delay Federal Reserve rate cut bets
The core PCE Price Index, which excludes volatile food and energy prices, is seen as the more influential measure of inflation in terms of Fed positioning. The index is forecast to rise 0.3% on a monthly basis in March, matching February’s increase.