Yen May Set Important Top (USDJPY Bottom)
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. All the while, FX Options risk reversals are their most bullish the USDJPY in at least 8 years. There is significant risk that the Japanese Yen may have set an important top (USDJPY bottom), but attempting to catch bottoms remains very difficult and risky.
The ratio of long to short positions in the USDJPY stands at 9.65 as nearly 91% of traders are long. Sentiment is mostly unchanged since last week as the pair has remained near congestion lows. The SSI gives contrarian signal that the pair may continue to decline, but we warn against taking aggressive short positions on considerable risk of reversal.
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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