USD/JPY Price Analysis: Rebound to Offer Opportunity

2018-02-20 18:00:00

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USD/JPY Daily Price Chart
USD/JPY 240min Price Chart
USD/JPY IG Client Sentiment
Relevant USD/JPY Data Releases

USD/JPY near-term rebound underway-Broader risk lower sub-107.84
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USD/JPY rebounded off downtrend structural support last week with the immediate focus now on the near-term advance. IF the broader trend is to remains intact, this rally should reach exhaustion relatively soon.

USD/JPY Daily Price Chart

Technical Outlook: Last week we highlighted that USD/JPY was approaching key support at, “the 61.8% retracement of the 2016 advance at 106.38. Note that a sliding parallel of the dominant slope caught the lows today and may offer a reprieve near-term… From a trading standpoint, this support zone could interrupt things a bit but look to fade strength sub-107.84.” Price registered a low precisely at the May low at 105.55 before rebounding sharply into the close of the week.

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USD/JPY 240min Price Chart

Notes: A closer look at USD/JPY price action sees the pair approaching initial resistance at 107.45/50 with our near-term bearish invalidation steady at the median—line / 107.84. Interim support is eyed at 106.80 with a break below 106.33 risking a drop towards the lower parallel / 105.55- a break there would suggest a much more significant breakdown is underway with such a scenario targeting 104.32 & 103.48.

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Bottom line: the immediate focus is on possible exhaustion on this rebound with the broader risk still lower sub-107.84. From a trading standpoint, I’m looking to fade a leg higher in price ultimately looking for a test of the lows / structural support (IF reached would be an area of interest for exhaustion / long-entries).

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USD/JPY IG Client Sentiment

A summary of IG Client Sentiment shows traders are net-long USD/JPY- the ratio stands at +3.15 (75.9% of traders are long) – bearishreading
Traders remained net-long since Dec 29th; price has moved 5.2% lower since then
Long positions are 0.5% lower than yesterday and 9.2% higher from last week
Short positions are1.0% lower than yesterday and 4.8% lower from last week
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USDJPY prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger USDJPY-bearish contrarian trading bias from a sentiment standpoint.

See how shifts in USD/JPY retail positioning are impacting trend- Click here to learn more about sentiment!