Yen Outlook Unclear on Mixed Sentiment
USDJPY – Trading crowds remain aggressively net-long the US Dollar against the Japanese Yen and have been long since the pair traded at 90, giving us consistent signal that the USDJPY could fall to further lows. Yet it serves to warn that recent CFTC Commitment of Traders data showed that Non-commercial futures traders were heavily long the Japanese Yen (short the USDJPY). Very one-sided positioning warns that the USDJPY could bounce on any sudden short covering.
The ratio of long to short positions in the USDJPY stands at 4.23 as nearly 81% of traders are long. Yesterday, the ratio was at 4.23 as 81% of open positions were long. In detail, long positions are 2.2% lower than yesterday and 0.9% stronger since last week. Short positions are 2.1% lower than yesterday and 6.5% weaker since last week. Open interest is 2.2% weaker than yesterday and 4.0% below its monthly average. The SSI is a contrarian indicator and signals more USDJPY losses.
The broader trend favors USDJPY losses, but we see little likelihood of major moves in the last days of trading for 2011.
How do we interpret the SSI? Watch an FXCM Expo Presentation that explains the SSI.
--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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