Japanese Yen, USD/JPY, AUD/JPY, Technical Analysis, Retail Trader Positioning – Talking Points

  • Japanese Yen continues to remain under pressure this year so far
  • Keep a close eye out for net-short bias in USD/JPY and AUD/JPY
  • If prices turn lower, watch for rising support from earlier in 2021

The Japanese Yen remains under pressure, with pairs like USD/JPY and AUD/JPY maintaining dominant uptrends since the beginning of this year. Since then, retail traders have been either unwinding net-long positioning, or maintaining a short bias in these pairs.

This may spell further weakness for the Yen if this trend continues. A way to gauge this is through IG Client Sentiment (IGCS. It is typically a contrarian indicator. To learn more about IGCS, check out the recording of my webinar from last week, where I discussed how you can use it in a trading strategy.

USD/JPY Sentiment Outlook – Mixed

The IGCS gauge implies that about 52% of retail traders are net-long USD/JPY. The number of traders net-long is 23.35% higher compared to yesterday. However, downside exposure increased by 13.56% from a week ago. The fact traders are net-long hints prices may fall. But, recent changes in sentiment offers a mixed outlook.

Japanese Yen Outlook: USD/JPY, AUD/JPY Uptrends in Focus as Net-Short Bets Cool

Technical Analysis

USD/JPY continues to play out the bullish implications of a Falling Wedge chart pattern after prices broke above it in April. Meanwhile, guiding the pair higher has been rising support from the beginning of this year. With that in mind, a push above the May 28th high could open the door to uptrend resumption. Otherwise, a break under support would expose the 100-day Simple Moving Average (SMA).

USD/JPY Daily Chart

USD/JPY

Chart Created in Trading View

AUD/JPY Sentiment Outlook – Bearish

The IGCS gauge implies that about 46% of AUD/JPY traders are net-long. Upside exposure increased by 4.23% and 30.59% over a daily and weekly basis respectively. The fact retail traders are net-short hints prices may keep rising. But, recent changes in sentiment warn that the current prices could reverse lower.

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Japanese Yen Outlook: USD/JPY, AUD/JPY Uptrends in Focus as Net-Short Bets Cool

Technical Analysis

AUD/JPY is pushing deeper into a key zone of resistance between 84.951 and 85.813. Guiding the pair higher seems to be rising support from February. Keep a close eye on RSI, negative divergence seems to be emerging. That is a sign of fading momentum which can at times precede a turn lower. Otherwise, clearing resistance exposes the 100% Fibonacci extension at 86.991.

AUD/JPY Daily Chart

Japanese Yen Outlook: USD/JPY, AUD/JPY Uptrends in Focus as Net-Short Bets Cool

Chart Created in Trading View

*IG Client 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

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