US Dollar Sets Bottom Against Japanese Yen
USDJPY – Why is the US Dollar so strong against the Japanese Yen? A massive surge in US Treasury Yields has produced in-kind moves in the correlated USDJPY. And in fact recent USDJPY strength has produced a similarly substantial shift in forex market sentiment.
FX trading crowds had remained net-long the US Dollar against the Japanese Yen for nearly 2 years as it crossed below ¥90. Such one-sided sentiment gave us ample reason to stay bearish the USDJPY.
Yet as of several weeks ago we warned that, “we believe that the US Dollar/Japanese Yen pair has set an important bottom and looks to trade higher through the foreseeable future.” As of yesterday crowds turned net-short USDJPY for the first time in nearly 2 years. And though markets never move in a straight line, we favor buying short-term USDJPY weakness in expectation of further strength.
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--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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