Japanese Yen May have Topped versus Dollar
Retail FX trading crowds are near their most net-long the US Dollar (ticker: USDOLLAR) against the Japanese Yen since the pair set record-lows, and such one-sided sentiment warns that the USDJPY may have set an important floor at ¥77.90.
Two weeks ago we wrote that we saw high probability of a long-term USDJPY bottom, but timing a reversal remained extremely difficult amidst the clear-cut downtrend. Yet as we wrote in that same report, seasonal trends across FX markets show that currencies tend to produce lasting highs and lows at the beginning and end of each month.
The USDJPY set its most recent bottom exactly on August 1 at ¥77.90, and its seasonal significance adds further weight to the possibility that it could be the low. We would ideally see a larger swing in retail sentiment before growing more aggressively bullish, but early signs suggest that the Japanese Yen set an important top versus the US Dollar.
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--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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