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Japanese Yen Outlook: USD/JPY, EUR/JPY at Risk Amid Rising Net-Long Bets

Japanese Yen Outlook: USD/JPY, EUR/JPY at Risk Amid Rising Net-Long Bets

Daniel Dubrovsky, Strategist

Japanese Yen, USD/JPY, EUR/JPY, Technical Analysis, Retail Trader Positioning - Talking Points

  • Retail traders are betting on a continued decline in the Yen
  • This could precede a turn lower in USD/JPY and EUR/JPY
  • Check out my webinar recording to learn more about IGCS

According to IG Client Sentiment (IGCS), retail investors are seemingly increasing their long exposure in Japanese Yen crosses like USD/JPY and EUR/JPY. IGCS is typically a contrarian indicator. This could signal more room for these pairs to fall ahead. For further analysis into the Yen and IGCS, where I discussed how you can use the tool in your own trading strategy, check out the recording of this week’s webinar above.

USD/JPY Sentiment Outlook - Bearish

The IGCS gauge implies that about 56% of retail traders are net-long USD/JPY. Upside exposure increased by 5.22% and 13.19% over a daily and weekly basis respectively. The fact traders are net-long hints prices may continue falling. The combination of current sentiment and recent changes further supports that the pair may weaken ahead.

Japanese Yen Outlook: USD/JPY, EUR/JPY at Risk Amid Rising Net-Long Bets

Technical Analysis

USD/JPY is attempting to find follow-through in the aftermath of a Bearish Engulfing candlestick pattern. This could spell a turning point for the pair. But, rising support from the beginning of this year is still maintaining the dominant upside bias. A breakout under it could open the door to testing the 100-day Simple Moving Average (SMA). The latter may reinstate the focus to the upside.

USD/JPY Daily Chart

Japanese Yen Outlook: USD/JPY, EUR/JPY at Risk Amid Rising Net-Long Bets

Chart Created in Trading View

EUR/JPY Sentiment Outlook - Bearish

The IGCS gauge implies that about 46% of retail investors are net-long EUR/JPY. Upside exposure increased by 17.67% and 28.62% over a daily and weekly basis respectively. The fact traders are net-short hints prices may keep rising. But, the combination of current sentiment and recent changes warns that the pair may turn lower ahead.

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Japanese Yen Outlook: USD/JPY, EUR/JPY at Risk Amid Rising Net-Long Bets

Technical Analysis

EUR/JPY is attempting to find follow-through after a Hanging Man candlestick pattern emerged. While prices have declined slightly since then, the 20-day SMA is maintaining the dominant focus to the upside. As such, a close under the line could see the pair aim lower towards rising support from last year. In that outcome, the trendline may reinvigorate bulls as it acts as key support.

EUR/JPY Daily Chart

Japanese Yen Outlook: USD/JPY, EUR/JPY at Risk Amid Rising Net-Long Bets

Chart Created in Trading View

*IG Client Sentiment Charts and Positioning Data Used from June 9th Report

--- Written by Daniel Dubrovsky, Strategist 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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