USDJPY – Retail forex traders have sold aggressively into US Dollar strength against the Japanese Yen, and the sharp reversal in positioning have led our sentiment-based strategies to buy USDJPY strength.
Trade Implications – USDJPY: Last week we wrote that our Breakout-based and trend-following strategies sold the USDJPY, EURJPY, GBPJPY, and AUDJPY. Yet a noteworthy reversal in price action and sentiment has forced those systems to go long the Yen crosses (short the JPY itself). Previously we had warned of a potential sentiment extreme forcing a larger USDJPY sell-off. Yet that reversal has arguably proven short-lived, and markets seem all too willing to send the JPY lower (USDJPY higher).
Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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