USDJPY – A surge in the US Dollar (ticker: USDOLLAR) versus the Japanese Yen has produced a similarly significant shift in retail forex trader sentiment.
According to our proprietary Speculative Sentiment Index data, the number of retail traders long the USDJPY has fallen near its lowest levels since July. A surge in short interest leaves net-positioning at a mere 2.21 traders long for every one short—compared to recent ratios above 5:1.
We maintain that the USDJPY set a significant bottom through September, and the recent move obviously lends weight to that argument. We remain bullish USDJPY and bearish the Japanese Yen, but we need to be wary of the potential for a JPY bounce amidst increasingly one-sided COT futures positioning.
--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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