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USDJPY – Retail FX traders are heavily long the US Dollar versus the Japanese Yen, and a contrarian view of crowd sentiment warns that the USD/JPY may test further lows. Indeed the current ratio of open long positions to short positions is a notable 2.6 to 1—near the extremes seen through USD/JPY tumbles through late August.
We see pivotal USD/JPY support at the ¥119 mark, and a recent drop in FX volatility prices suggests that a major breakdown remains unlikely. Yet it’s likewise clear that a clear move lower would likewise coincide with a significant jump in broader USD volatility, and traders should proceed with caution as the pair nears key price levels.
See next currency section: AUDUSD - Australian Dollar Downtrend Remains Intact
Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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