Japanese Yen, GBP/JPY, AUD/JPY, IG Client Sentiment Outlook - Talking Points
- Japanese Yen has been falling on US-China trade deal, UK general election
- IG Client Sentiment signals a bullish outlook in GBP/JPY, bearish AUD/JPY
- The former is testing key support as the latter remains within a chart pattern
In this week’s session, I focused on the Japanese Yen outlook against the US Dollar, Australian Dollar and British Pound. Fundamental developments such as the US-China “phase one” trade agreement and last week’s UK general election have fueled weakness in the anti-risk JPY. Over the past 24 hours, there has been a bounce. In addition to the technicals, what do trader positioning bets have to say about the Yen’s trajectory?
GBP/JPY Sentiment Outlook
At the time of this writing, about 49 percent of GBP/JPY traders – as reported via IG Client Sentiment (IGCS) – are net long. Over a weekly and daily basis, there was a 35% and 20% respective decline in those biased to the upside. These outpaced fading interest in net-long bets. As a result, the combination of current sentiment and recent changes is offering a stronger bullish contrarian outlook in GBP/JPY.
This offers a sign of caution to treat recent GBP/JPY declines with a grain of salt. After topping around highs from April, the pair is aiming lower and is testing near-term rising support from October. If it holds, we may see a bounce back towards 146.50 as the push above falling resistance from February 2018 prevails. Otherwise, a daily close lower exposes the former psychological range between 140.69 to 141.51.
GBP/JPY Daily Chart
GBP/JPY Chart Created in Trading View
AUD/JPY Sentiment Outlook
Meanwhile, roughly 59 percent of those reported trading AUD/JPY are biased to the upside. Net-short positioning has declined about 21% and 27% on a weekly and daily basis respectively. This is as net-long bets fell only 19% and 5% over a weekly and daily period respectively. Taking these into account produces a bearish contrarian outlook as more traders are left attempting to pick the top.
That may continue driving AUD/JPY lower towards the floor of a Rising Wedge. This is typically a bearish chart pattern that could eventually spell the end of the dominant uptrend from late August. Near-term support is a key range between 74.84 and 74.48. As discussed in the webinar recording above, tomorrow’s Australian jobs report has the potential to fuel February RBA rate cut bets, sending AUD lower.
AUD/JPY Daily Chart
AUD/JPY Chart Created in Trading View
*IG Client Sentiment Charts and Positioning Data Used from December 17 Report
--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
