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Japanese Yen Outlook: USD/JPY, AUD/JPY Rates May Rise on Short Bets

Japanese Yen, USD/JPY, AUD/JPY, IG Client Sentiment – Talking Points

  • Anti-risk Japanese Yen eyeing US-China trade deal and Fed repos
  • USD/JPY and AUD/JPY outlook may favor upside on positioning
  • USD/JPY may extend uptrend from August, is AUD/JPY stalling?

Japanese Yen, USD/JPY, AUD/JPY in Focus Ahead of Trade Wars and Fed Repos

This week, I discussed the outlook for USD/JPY and AUD/JPY incorporating IG Client Sentiment into fundamental and technical analysis. Themes covered included the US-China “phase one” trade deal and the Federal Reserve’s repo operations. The latter is likely going to be a key driver for market sentiment and thus spillover into the anti-risk Japanese Yen. But what does trader conviction have to say going from here?

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USD/JPY Sentiment Outlook

At the time of this writing, about 37.86 percent of retail traders in USD/JPY are net long. This is down from just under 60% earlier this month when the currency pair was trading just above 108.00. Since then, prices climbed over 1.8% to 109.98 as of the January 14 close. From a psychological perspective, this represented more traders attempting to pick the top in the currency pair.

In fact, net-short positioning is up about 49.43% over a week-to-week basis. We typically take a contrarian view to crowd sentiment, and the fact traders are netshort suggests USD/JPY may continue to rise. Recent changes in market positioning reinforces and offers a stronger bullish outlook. This could speak to a greater amount of investors attempting to pick the reversal point in the Yen.

Client Positioning

Technical Analysis

From a technical standpoint, USD/JPY continues to trade above key descending resistance from November 2018. This speaks to what may be a resumption of the dominant uptrend from the end of August. That may take prices towards highs from April. Above this point stands a key falling trend line from late-2016/early-2017. Immediate support sits bellow as the range between 109.49 – 109.72.

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USD/JPY Daily Chart

USD/JPY Chart Created in Trading View

AUD/JPY Sentiment Outlook

AUD/JPY is also facing what could be a similar scenario as USD/JPY. About 52.34% of retail traders are net long the former. This follows an uptick in net short bets, which are up 23.26% and 28.02% on a daily and weekly basis respectively. That may have contributed to AUD/JPY’s ascent since the middle of last week, which is up over 1.9%.

From here, the fact traders are netlong suggests that AUD/JPY prices may continue falling. However, traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current AUD/JPY price trend may extend higher despite the fact traders remain biased to the upside. That would represent an unwinding in speculation of a top in the currency pair.

Client Positioning

Technical Analysis

On a daily chart, AUD/JPY experienced a false downside breakout last week. That has reinstated the focus on the key uptrend since the end of August. Yet prices are once again stalling around the psychological barrier between 75.93 and 76.39. This is an area that has been holding since May of 2019. A push above resistance, backed by IG Client Sentiment, would likely mean the resumption of gains over the past 5 months.

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AUD/JPY Daily Chart

AUD/JPY Chart Created in Trading View

*IG Client Sentiment Charts and Positioning Data Used from January 14 Report

— Written by Daniel Dubrovsky, Currency Analyst for

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter