Japanese Yen – The Japanese Yen has traded mostly sideways after setting multi-year lows (USDJPY highs). Our retail forex-based sentiment indicator continues to call for JPY losses (USDJPY gains).
Trade Implications – EURJPY: Our purely sentiment-based Momentum2 system boasted substantial gains trading the EURJPY and other Yen pairs through the beginning of the month, but the strategy has since flipped directly on the EURJPY and suffered losses through sideways price action. Past performance is not indicative of future results, but Momentum2 has historically been one of our most streak-prone trading strategies: it tends to do very well or very poorly for weeks and months at a time.
Our trading strategy biases have been heavily overweight Japanese Yen given that the SSI-based Momentum2 and Breakout2 systems have done very well trading it amidst massive volatility. We remain overweight these strategies (and bearish JPY, bullish EURJPY), but it’s critical to note that a highly-anticipated Bank of Japan interest rate decision could force significant swings across Yen pairs.
Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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