Japanese Yen May Fall as Euro Gains, Will GBP/JPY Follow EUR/JPY?
Japanese Yen, EUR/JPY, GBP/JPY, IG Client Sentiment Outlook - Talking Points:
- Japanese Yen under pressure on rising US-China trade deal expectations
- EUR/JPY may push above 2018 falling resistance on bullish IGCS signal
- GBP/JPY consolidation eyes breakout, positioning outlook turns neutral
Join me on Wednesdays at 01:00 GMT as I cover what IG Client Sentiment is saying about the prevailing trends in financial markets!
The anti-risk Japanese Yen has been losing ground to some of its major counterparts as of late. Bets of a US-China trade deal recently pushed the S&P 500 and Dow Jones to record highs, fueling a “risk-on” trading dynamic. The Euro and British Pound capitalized on JPY’s weakness, eyeing Eurozone CPI and UK General Election polling ahead respectively. How might trader positioning influence their path ahead?
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EUR/JPY Sentiment Outlook
Taking a look at IG Client Sentiment, about 48.11 percent of traders are net-long EUR/JPY. This is down from almost 55% upside bias a couple of days ago. Traders are further net-short than yesterday and last week.The combination of current sentiment and recent changes offers a stronger EUR/JPY-bullish contrarian trading bias. In other words, we are seeing increasingly more traders bet where the pair could top.
From a technical standpoint, EUR/JPY needs to overcome descending resistance from September 2018 – red channel on the chart below. That could pave the way for a test of October highs which if taken out, opens the door to overturning the dominant downtrend. Otherwise, should bears regain momentum, near-term support sits around 119.25.
EUR/JPY Daily Chart
GBP/JPY Sentiment Outlook
Against the British Pound, the Japanese Yen recently saw a downtick in net-long positioning. That briefly pushed GBP/JPY IG Client Sentiment outlook to bullish. Since then, the forecast has turned neutral as positioning is less net-short than yesterday but more so compared to last week. As such, the combination of current sentiment and recent changes gives us a further mixed GBP/JPY trading bias.
Technical analysis warns that GBP/JPY upside momentum is fading, as reflected in negative RSI divergence. At times, this signal can translate into a turn lower or precede consolidation. The latter has thus far been the case. A daily close under 138.87 opens the door to testing a potential rising trend line from September (blue line). Clearing resistance (140.69 – 141.51) resumes the dominant uptrend.
GBP/JPY Daily Chart
*IG Client Sentiment Charts and Positioning Data Used from November 26 Report
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--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.