US Dollar Outlook Bearish versus Yen
USDJPY – In the past two months we have argued enthusiastically in favor of US Dollar strength against the Japanese Yen and a lasting USDJPY bottom. Yet the most recent shift in FX options and futures sentiment, and clear historical Japanese Yen patterns pointed to a short-term JPY reversal. The next question is obvious: how far do we think the USDJPY could go before resuming its broader reversal?
Retail trading crowds are growing progressively net-long the USDJPY, and until we see a break in this trend we’ll hesitate to call for a resumption of broader USDJPY rallies. Does that mean we’ll call for sharp declines? Not necessarily. Given recent consolidation patterns, we see little reason for a major break lower.
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--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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