Japanese Yen, USD/JPY, AUD/JPY, EUR/JPY, Technical Analysis, Retail Trader Positioning – Talking Points
- Retail traders increasingly bet that the Japanese Yen may rise
- Short exposure is rising in USD/JPY, AUD/JPY and EUR/JPY
- Will they fall in the sessions ahead? Check out the recording above!
According to IG Client Sentiment (IGCS), retail traders appear to be increasingly betting that the Japanese Yen could appreciate against the US Dollar, Australian Dollar and Euro. IGCS can at times be a contrarian indicator. If this trend in positioning continues, the Yen could weaken instead. To learn more, check out this week’s recording of my webinar above.
USD/JPY Sentiment Outlook – Bullish
The IGCS gauge implies that roughly 26% of retail traders are net-long USD/JPY. Downside exposure has increased by 12.27% and 155.21% over a daily and weekly basis respectively. We typically take a contrarian view to crowd sentiment. Since most traders are net-short, it suggests USD/JPY may rise. Recent changes in positioning are offering a stronger bullish contrarian trading bias.
USD/JPY confirmed a break above the midpoint of the Fibonacci extension at 110.813, rising towards the June high at 111.658. Clearing the latter opens the door to resuming the dominant uptrend since the beginning of this year. That would also expose the 2020 high at 112.228, which could act as key resistance. That may pivot prices back lower.
USD/JPY Daily Chart
AUD/JPY Sentiment Outlook – Bullish
The IGCS gauge implies that 39% of retail investors are net-long AUD/JPY. The number of traders net-short climbed by 31.66% and 28.43% over a daily and weekly basis respectively. Since most traders are net-short, it suggests that AUD/JPY may continue to rise. The combination of this and recent changes in positioning are further underscoring a bullish contrarian trading bias.
AUD/JPY has been extending gains in the aftermath of a Bullish Engulfing candlestick pattern. However, price gains have slowed after clearing the 50-day Simple Moving Average (SMA). Immediate resistance seems to be the 38.2% Fibonacci retracement at 80.92. Moreover, above this price as another well-defined zone of resistance between 81.65 and 82.02. Clearing this range may open the door to a broader push higher. Otherwise, prices could remain in a consolidative setting.
AUD/JPY Daily Chart
EUR/JPY Sentiment Outlook – Bullish
The IGCS gauge implies that about 38% of retail traders are net-long EUR/JPY. Downside exposure increased by 0.93% and 47.96% over a daily and weekly basis respectively. Since most traders remain net-short, it suggests EUR/JPY may continue rising. Recent changes in positioning are offering a stronger bullish contrarian trading bias.
EUR/JPY may be in the process of forming a bullish Double Bottom chart formation. This followed a bounce off the 127.93 – 128.29 support zone. Prices are approaching the neckline of the Double Bottom around 130.666. Confirming a breakout above this price may open the door to extending gains towards highs from earlier this year. Still, keep a close eye on the 100-day SMA. It could pivot prices back lower.
EUR/JPY Daily Chart
*IG Client Sentiment Charts and Positioning Data Used from September 29th Report
— Written by Daniel Dubrovsky, Strategist for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter