Talking Points:
- USD/JPY Short Term Downtrend Resumes
- Market Sentiment Remains Extreme; IG ClientSentiment Reading at +2.39
- Looking for additional trade ideas for the US Dollar & Yen? Read our 2017 Market Forecast
The USD/JPY is trading lower for the second consecutive session this week, and is now trading just above the standing 2017 low at 110.11. Technically this decline places the USD/JPY back in a short term downtrend. Currently the pair is back below its 10 day EMA (exponential moving average) at 110.96, and this value should be seen as a point of resistance on the daily chart. If prices continue to fall this week, traders should next look for the USD/JPY to challenge new lower lows and eventually move on the 200 day MVA (simple moving average) at 109.67.
In the event that prices fail to breakout lower, traders should first look for the USD/JPY to rebound back above the previously mentioned 10 day EMA. A close above this point should be seen as significant, and would suggest a change in momentum in the short term. In this bullish scenario, traders should next look for the USD/JPY to challenge the current weekly high found at 111.58.
USD/JPY, Daily Chart with Averages
Sentiment analysis for the USD/JPY shows the majority of traders remaining net long the currency pair. Currently IG Client Sentiment for the USD/JPY reads at +2.39. It should be noted here that sentiment has remained net long since January 9th. Typically when read as a contrarian signal, this long reading suggests that the pair may decline further. In the event that prices breakout to new 2017 lows, it is possible for IG Client Sentiment to reach even further extremes. Alternatively, in the even the event that the USD/JPY bounces higher, it would be reasonably expected to see sentiment figures decline back towards more neutral values.
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--- Written by Walker, Analyst for DailyFX.com
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