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USDJPY– Retail FX traders are once again heavily long the US Dollar versus the Japanese Yen—a sharp shift from just a week ago—and a contrarian view of crowd sentiment points to further USD/JPY weakness. Last week we noted the opposite as traders had turned net-short USD/JPY, but that proved quite short-lived. Now we are far more circumspect as the Japanese Yen nears critical resistance (USD/JPY support) ahead of key US Federal Reserve and Bank of Japan interest rate decisions.
The larger trend favors Dollar weakness against the Yen and indeed a contrarian view of retail sentiment acts as a confirmation of the downtrend. Yet it will be very important to watch the USD/JPY exchange rate’s next moves ahead of critical event risk and a test of key technical levels.
See next currency section: XAUUSD - Gold Prices Face Key Risk of Turn Lower
Written by David Rodriguez, Senior Strategist for DailyFX.com
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