USD/JPY Shorts in Focus, AUD/JPY May Fall on Long Bets

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

• Japanese Yen has been pressured as equities shrugged off coronavirus fears
• Net-short bets hint upside USD/JPY bias, though recent changes offer caution
• AUD/JPY IG Client Sentiment outlook bearish with short bets on the decline

How Can Trader Positioning Impact the Japanese Yen Trajectory?

Following a sudden surge in reported coronavirus cases in China, the anti-risk Japanese Yen as S&P 500 futures declined. Thus far, equities have mostly remained resilient which has been pressuring the Yen. The situation is arguably fluid. In the meantime, how are traders positioning around JPY and how can that impact its trajectory? Check out the full recording to this week’s session on IG Client Sentiment above.

USD/JPY Sentiment Outlook

At the time of this writing, about 43.72% of traders are net long USD/JPY according to IG Client Sentiment. This is down from about a 60% upside bias at the beginning of February. Since then, prices climbed about 1.6%, representing a larger share of investors attempting to pick the top in the Yen. While traders remain net short, which suggests a bullish outlook, recent changes in positioning offer a mixed forecast.

USD/JPY Technical Analysis

USD/JPY is still adhering to a cautiously upward technical bias, with prices being supported by a rising trend line from August. The push above descending resistance from November 2018 is still holding, but prices risk stalling at the January high at 110.29. A push above the latter may entail uptrend resumption towards highs from May 2019. Immediate support is a psychological barrier between 109.49 to 109.72.

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USD/JPY Daily Chart

USD/JPY Chart Created in Trading View

AUD/JPY Sentiment Outlook

The Australian Dollar may be at risk against the Japanese Yen from a psychological perspective. According to IG Client Sentiment, net-short bets are down 10.98% and 7.59% over a daily and weekly basis respectively at this moment in time. With AUD/JPY traders about 69.90% net long, the combination of current sentiment and recent changes offers a stronger bearish contrarian trading bias.

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AUD/JPY Technical Analysis

The AUD/JPY technical outlook seems to favor the downside after prices took out a rising channel from August in late January. Immediate resistance is the psychological barrier between 74.48 to 74.84. A turn lower places the focus on immediate support at 73.35 followed by the January low at 72.41. That would be in line with the positioning signals hinted via IG Client Sentiment.

AUD/JPY Daily Chart

AUD/JPY Chart Created in Trading View

*IG Client Sentiment Charts and Positioning Data Used from February 12 Report

— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

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