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CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Japanese yen outlook: will USD/JPY, AUD/JPY fall as retail traders go long?

Retail traders have sold the Japanese yen despite recent strength; as a contrarian signal, this might bode ill for USD/JPY, AUD/JPY and fundamental analysis is provided in the webinar recording above.

Source: Bloomberg

The Japanese yen has been making a comeback over the past couple of weeks following a prolonged period of weakness this year. Retail traders have been noticing. Looking at IG Client Sentiment (IGCS), long exposure has been rising in USD/JPY and AUD/JPY. IGCS tends to function as a contrarian indicator. If this trend in positioning continues, perhaps the yen might have more room to recover. However, do the fundamentals align with this scenario? For detailed coverage, check out the webinar recording above.

USD/JPY sentiment outlook - bearish

The IGCS gauge shows that about 44% of retail traders are net-long USD/JPY. Since most traders are still biased lower, this hints prices may continue rising. However, upside exposure has climbed by 9.99% and 22.38% compared to yesterday and last week respectively. With that in mind, recent changes in exposure hint that recent losses in USD/JPY could extend in the sessions ahead.

Source: DailyFX

Daily chart

USD/JPY has confirmed a breakout under the rising trendline from March, opening the door to extending losses. However, prices were unable to clear the 130.83 – 131.34 inflection zone. This is as the 100-day Simple Moving Average (SMA) held as support. In the event of further upside gains, this could spell a resumption of the broader uptrend. Otherwise, clearing support would likely open the door to continue the descent from late June towards May lows.

Source: TradingView

AUD/JPY sentiment outlook - bearish

The IGCS gauge reveals that about 38% of retail traders are net-long AUD/JPY. The majority of them remain biased to the downside. This suggests prices may continue rising. However, downside exposure has decreased by 17.79% and 31.25% compared to yesterday and last week respectively. With that in mind, recent changes in sentiment are hinting that AUD/JPY may extend recent losses.

Source: DailyFX

Daily chart

AUD/JPY has broken under the trendline from February, but further downside confirmation has been somewhat lacking. A larger lower wick was created on Tuesday, reflecting buyers coming in as losses were trimmed. This has left behind a range of support between 90.52 and 91.42. Clearing this zone would open the door to extending losses towards the May low. Otherwise, a bounce would place the focus back on the trendline, which could hold as new resistance.

Source: TradingView

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.


This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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