Japanese Yen Offers Attractive Range Trading
USDJPY – Retail traders have bought aggressively into US Dollar (ticker: USDOLLAR) weakness against the Japanese Yen, and we see little choice but call for further USDJPY weakness through near-term trading. We recently wrote that the USD likely set a significant bottom versus the JPY on an important jump in highly-correlated US Treasury Yields. Yet yields have pulled back sharply, while our proprietary Speculative Sentiment Index data warns against buying into Dollar weakness against the Yen.
Our sample shows there are nearly 11 retail traders long USDJPY for every one that is short. Such incredibly one-sided sentiment warns against joining against the crowd in going long USDJPY, but exceedingly low FX market volatility expectations likewise make selling at these levels fairly unattractive. Trading conditions may ultimately favor short-term range trading in the listless USDJPY.
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--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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