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Japanese Yen Outlook: USD/JPY, AUD/JPY, GBP/JPY May Rise with Short Bets

Japanese Yen Outlook: USD/JPY, AUD/JPY, GBP/JPY May Rise with Short Bets

Daniel Dubrovsky, Strategist

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

  • Retail traders are increasingly betting the Japanese Yen may rise
  • Downside exposure is increasing in USD/JPY, AUD/JPY, GBP/JPY
  • This is measured by IGCS, which can at times be a contrarian indicator

According to IG Client Sentiment (IGCS), retail traders appear to be increasingly betting that the Japanese Yen could appreciate ahead. Downside exposure in USD/JPY, AUD/JPY and GBP/JPY is on the rise. IGCS can at times be a contrarian indicator. Meaning that, if this trend in positioning continues, the Yen could be vulnerable ahead. To learn more, check out last week’s recording on my IGCS webinar.

USD/JPY Sentiment Outlook - Bullish

The IGCS gauge implies that roughly 50% of retail traders are net-long USD/JPY. Upside exposure has decreased by 6.36% and 2.77% over a daily and weekly basis respectively. With that in mind, the combination of current sentiment and recent changes offers a stronger bullish contrarian trading bias.

Japanese Yen Outlook: USD/JPY, AUD/JPY, GBP/JPY May Rise with Short Bets

Technical Analysis

USD/JPY is resting former rising support from the beginning of this year. The pair has been struggling to find follow-through to the downside as the 50-day Simple Moving Average (SMA) maintained the dominant upside focus. The former trendline could come into play as new resistance, sending prices back lower. Immediate support seems to be at 109.53.

USD/JPY Daily Chart

Japanese Yen Outlook: USD/JPY, AUD/JPY, GBP/JPY May Rise with Short Bets

Chart Created in Trading View

AUD/JPY Sentiment Outlook - Bullish

The IGCS gauge implies that about 40% of retail traders are net-long AUD/JPY. Downside exposure increased by 4.72% and 13.68% over a daily and weekly basis respectively. The fact traders are net-short hints prices may prices. The combination of that and recent changes in sentiment further compounds a bullish contrarian trading bias.

Japanese Yen Outlook: USD/JPY, AUD/JPY, GBP/JPY May Rise with Short Bets

Technical Analysis

AUD/JPY continues to consolidate just above the key 81.323 – 81.987 support zone, attempting to extend losses since May’s top. A bearish crossover between the 20- and 50-day SMAs hints at a near-term downward technical bias. However, the 200-day SMA is nearing and it could reinstate the dominant upward trajectory as key support.

AUD/JPY Daily Chart

Japanese Yen Outlook: USD/JPY, AUD/JPY, GBP/JPY May Rise with Short Bets

Chart Created in Trading View

GBP/JPY Sentiment Outlook - Bullish

The IGCS gauge implies that about 36% of retail investors are net-long GBP/JPY. Downside exposure increased by 3.56% and 6.08% over a daily and weekly basis respectively. The fact traders are net-short suggests prices may continue to rise. In addition to this, recent shifts in sentiment is offering a stronger bullish contrarian trading bias.

Japanese Yen Outlook: USD/JPY, AUD/JPY, GBP/JPY May Rise with Short Bets

Technical Analysis

GBP/JPY could be vulnerable to extending May’s top after a bearish crossover formed between the 20-day and 50-day SMAs. Sustaining losses entails clearing the 150.67 – 151.32 support zone. That would expose the 148.53 – 149.38 range. Rising support from 2020 could also come into play, reinstating the dominant upside focus.

GBP/JPY Daily Chart

Japanese Yen Outlook: USD/JPY, AUD/JPY, GBP/JPY May Rise with Short Bets

Chart Created in Trading View

*IG Client Sentiment Charts and Positioning Data Used from July 13th 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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