Japanese Yen Sentiment at Extremes – What’s Next?

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USDJPY– Retail FX traders remain very heavily net-long the US Dollar versus the Japanese Yen, and a contrarian view of ‘crowd’ sentiment leaves us firmly in favor of selling into weakness. Indeed, our data now shows a significant 80 percent of all open USD/JPY positions are long.

The ratio of long to short positions now matches multi-year extremes set as the pair set key lows near ¥100. This in itself suggests we may be in the midst of a similarly significant sentiment extreme. And yet by definition ‘the extreme’ is only clear in hindsight.

Until we see a substantive swing in retail FX positioning we see little reason to abandon our USD/JPY-bearish trading bias.

See next currency section:XAUUSD - Gold Price Once Again set to Shine

Written by David Rodriguez, Senior Strategist for DailyFX.com

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