USD / JPY and AUD / JPY bullish trends are center of attention as net shorts bets cool down
Japanese Yen, USD / JPY, AUD / JPY, Technical Analysis, Retail Trader Positioning – Talking Points
- Japanese yen remains under pressure this year so far
- Keep a close eye on the net-short bias in USD / JPY and AUD / JPY
- If prices drop, watch for increasing support from early 2021
The Japanese yen remains under pressure, with pairs like USD / JPY and AUD / JPY maintaining dominant bullish trends since the start of this year. Since then, retail traders have either unwound their net long positioning or maintained a short bias on these pairs.
This could signify further weakness for the yen if this trend continues. One way to gauge this is through IG Client Sentiment (IGCS. This is usually a contrarian indicator. To learn more about IGCS, check recording of my webinar last week where I explained how you can use it in a trading strategy.
USD / JPY Sentiment Outlook – Mixed
the IGCS gauge implies that around 52% of retail traders are net-long USD / JPY. The number of net-long traders is 23.35% higher than yesterday. However, downside exposure increased 13.56% from a week ago. The fact that traders are long on the net suggests that prices may fall. But, recent sentiment shifts offer mixed prospects.
The USD / JPY continues to play on the bullish implications of a falling wedge chart pattern after prices broke above it in April. Meanwhile, guiding the pair higher has increased support since the start of this year. With that in mind, a push above May 28e high could open the door for a resumption of the uptrend. Otherwise, a break below the support would expose the 100-day Simple Moving Average (SMA).
USD / JPY Daily Chart
AUD / JPY Sentiment Outlook – Bearish
the IGCS gauge implies that about 46% of AUD / JPY traders are net long. The upside exposure increased 4.23% and 30.59% on a daily and weekly basis respectively. The fact that retail traders are net short suggests that prices may continue to rise. But, recent sentiment shifts are warning that current prices could reverse lower.
AUD / JPY sinks deeper into a key resistance area between 84.951 and 85.813. Guiding the pair higher appears to be upward support from February. Keep an eye on the RSI, a negative divergence appears to be emerging. This is a sign of slowing down that can sometimes precede a downward turn. Otherwise, the compensating resistor exposes the 100% Fibonacci extension at 86.991.
AUD / JPY daily chart
* IG customer sentiment charts and positioning data used from June 1st Report
— Written by Daniel Dubrovsky, Strategist for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter