US Dollar Forecast to Test Key Support vs. Yen
USDJPY – Trading crowds continue to build a US Dollar (ticker: USDOLLAR) long position against the Japanese Yen, and a contrarian view of extremely one-sided sentiment points to further USDJPY weakness. According to our FXCM Speculative Sentiment Index, there are over 6 traders long the USDJPY for every 1 that is short. Said ratio is the most extreme since February when the pair set a major bottom.
How low could we go from here? Our Senior Technical Strategist says there is little USDJPY support until the ¥78.30 mark. Resistance is better-defined at weekly highs of ¥80.05 and month-to-date peaks near ¥80.60. Limited volatility expectations suggest major breaks in either direction are unlikely, but our view on retail trader sentiment points to a test of near-term lows.
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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