Japanese Yen Bounce Probably only the Beginning

Japanese Yen – Wow. We’ll be the first to admit when we’ve gotten it wrong, but we couldn’t have been clearer in our preferences for a JPY bounce (USDJPY, EURJPY pullback). This could be the start of something big.

Trade Implications – EURJPY: To quote last week’s article, “we’ve writtenrepeatedly in favor of USDJPY and EURJPY strength…. But we can’t ignore the warning signs: our Senior Strategist points out that a mere 3% of professionals polled believe the JPY will trade higher—a historic extreme. Our proprietary retail FX trader sample is at its most short EURJPY on record.”

It’s no surprise that retail traders have bought into the recent dip, but the question’s clear—is this the start of a larger pullback? That much we don’t know yet, but the fact that professional sentiment and positioning was so incredibly one-sided warns of the potential for JPY strength (USDJPY, EURJPY weakness).

Written by David Rodriguez, Quantitative Strategist for DailyFX.com

Download all of our Sentiment-based trading strategies free via an ongoing promo on FXCMApps.com

To receive the Speculative Sentiment Index and other reports from this author via e-mail, sign up for his distribution list via this link.

Contact David via

Twitter at http://www.twitter.com/DRodriguezFX

Facebook at http://www.Facebook.com/DRodriguezFX