Talking Points:
• Technicals have shown recent indecision, but longer-term both Gold and USD/JPY seem to be carving major turns
• Speculative futures traders increased their long gold view the most on record while Yen shorts are near a record long
• Fundamentals connect this currency pair and commodity in profound ways, which may provide a simultaneous catalyst
See how retail traders are positioning in USDJPY, Gold and more on DailyFX at the FXCM SSI Sentiment Page.
While much of the market's attention is on EUR/USD and equities nowadays, two of the most interesting benchmarks for the financial system may be USD/JPY and gold. While recent technicals may reflect consolidation, it is a pause in a much larger reversal in trend with key breaks coming less than a month ago. From market interest, we find speculative positioning building remarkable pressure behind the scenes. In the futures market, the long-Yen view has hit its third highest level on record while the rapid upswing in long-gold positions has no precedence. Retail FX traders in contrast - with a generally shorter duration and more opportunistic in nature - have persistently fought the developing trends. These tensions will help provide the fuel for the next leg. But, it is the fundamentals that reflect the motivation and the deep themes that connect these two very different assets to the broader financial system. Risk trends and relative monetary policy will stir through these outlets and events like the FOMC rate decision will act as catalysts. We focus on the USDJPY and Gold for this weekend Strategy Video, but these two markets reflect a much bigger picture.
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