US Dollar Eyes Gains against the Yen
USDJPY – Forex trading crowds are their least net-long the US Dollar against the Japanese Yen since the pair last traded to ¥85, and the tide has clearly turned in favor of further USDJPY strength. The fact that the pair now trades comfortably above ¥80 suggests that this break is the “real deal”, and we favor further USDJPY gains through the short and medium term.
Our SSI ratio stands at 1.70 as there are 1.7 traders long for every one short. This is a substantial shift from several weeks ago when the same ratio stood at a substantial 17.5 to 1. Long interest dropped 14% since last week, though it’s interesting to note that shorts have likewise fallen 20% through the same stretch.
We believe that the US Dollar/Japanese Yen pair has set an important bottom and looks to trade higher through the foreseeable future. Of course, only one variable really matters in trading: time. Is it the best time to get long? Probably not; we see risks of a short-term pullback within a broader reversal higher. Yet sharp drops to fresh lows are in our opinion quite unlikely.
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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