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US Dollar Sell-Off Continues, USDJPY Falls Back Below 104.00

US Dollar Sell-Off Continues, USDJPY Falls Back Below 104.00

Nick Cawley, Senior Strategist

US Dollar and USDJPY Price, News and Analysis:

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The US dollar continues to lose value and is now nearing levels last seen in April 2018 as sellers dominate recent price action. Expectations of further monetary easing at the December FOMC meeting, a bulging US fiscal deficit, and a mildly positive market tone is weighing on the greenback, with one investment bank, Citi, recently suggesting that the US dollar could fall by up to 20% in 2021. The daily DXY chart remains weak and the September 1 low at 91.74 is under threat.

US Dollar (DXY) Daily Price Chart (March – November 18, 2020)

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USDJPY is one pair that is benefitting from the ongoing US dollar weakness and is now back below 104.00. The sell-off that started earlier this year has only been broken by bouts of risk-off activity before the trend lower took over again and the pair may well move all the way back to the early March spike low at 101.185. This time the move may continue even if risk appetite turns positive due to US dollar weakness, especially as recent CoT data show professionals heavily long of the Japanese Yen.

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Recent forays at, or very close to, 104.00 have been met with buying interest, rumored to include the Bank of Japan, but a break and close below 104 will leave 103.18 and 103.00 the figure vulnerable. The short-term series of lower highs and lower lows highlight the weakness in the pair.

USDJPY Daily Price Chart (January – November 18, 2020)

USD/JPY Bullish
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -4% -2% -3%
Weekly -2% 0% -1%
What does it mean for price action?
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IG client sentiment data show 63.61% of traders are net-long with the ratio of traders long to short at 1.75 to 1. We typically take a contrarian view to crowd sentiment, and the fact traders are net-longsuggests USD/JPY prices may continue to fall.Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed USD/JPY trading bias.

What is your view on the Japanese Yen – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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