Yen Likely to Consolidate as Crowds Switch Direction
Japanese Yen – The Japanese Yen continues to trade mostly sideways after several months of explosive declines, and choppy crowd sentiment suggests it could remain range-bound through near-term trading.
Trade Implications – EURJPY: On Monday we cited a sharp drop in Japanese Yen volatility expectations as the key reason to shift away from our volatility-friendly trading systems in the USDJPY and other JPY pairs.
And indeed our trend and price-following trading systems have had a poor run of form on the range-bound JPY pairs. Our purely sentiment-based Momentum2 system has most recently gone short EURJPY from ¥127.92 as crowds buy into the most recent decline, but we’d need to see real signs of conviction below multi-week lows at ¥127 to have confidence in said position. In the meantime range trading may be the most attractive strategy.
Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.