Shift in Sentiment Suggests USDJPY Trend May Continue

USDJPY: Retail trader data shows 67.1% of traders are net-long with the ratio of traders long to short at 2.04 to 1. In fact, traders have remained net-long since Dec 29 when USDJPY traded near 113.317; price has moved 3.7% lower since then. The number of traders net-long is 12.2% lower than yesterday and 23.5% lower from last week, while the number of traders net-short is 2.4% higher than yesterday and 5.0% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USDJPY prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current USDJPY price trend may soon reverse higher despite the fact traders remain net-long.

--- Written by Dylan Jusino, DailyFX Research