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Japanese Yen May Fall as Euro Gains, Will GBP/JPY Follow EUR/JPY?

Japanese Yen May Fall as Euro Gains, Will GBP/JPY Follow EUR/JPY?

Daniel Dubrovsky, Strategist

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?

To learn more about using IG Client Sentiment in your own analysis, check out our free trading guide!

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.

Japanese Yen May Fall as Euro Gains, Will GBP/JPY Follow EUR/JPY?

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

Japanese Yen May Fall as Euro Gains, Will GBP/JPY Follow EUR/JPY?

EUR/JPY Chart Created in Trading View

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.

Japanese Yen May Fall as Euro Gains, Will GBP/JPY Follow EUR/JPY?

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

Japanese Yen May Fall as Euro Gains, Will GBP/JPY Follow EUR/JPY?

GBP/JPY Chart Created in Trading View

*IG Client Sentiment Charts and Positioning Data Used from November 26 Report

Euro, British Pound, Yen Trading Resources

--- 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.

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