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FxWirePro: Yen not moving much but retail sentiment is

The Japanese yen is basically going nowhere,

  • Over the past two weeks, the Japanese yen has been moving in a tight range of 60 pips (112.2-111.65) and is hardly responding to any major catalyst.
  • After Easter holiday got over, the USD has been exceptionally strong pushing euro to 2018 low and the pound below the crucial support around 1.3 area. However, the yen was unfazed and actually strengthened against the USD while other majors have taken a hit.
  • This week, the U.S. benchmark stock index, S&P500 has touched all time high and trading just shy of breaking into 3000 area. This is risk-on sentiment, yet yen remains unfazed and continuing the range trade.

Not much seems to impact yen as bulls struggle to clear key resistance hurdle around 112.2 area.

However, something else is moving, while the yen is continuing its range trade; the retail sentiment.

Retail sentiment:

  • The sentiment reports from IG Markets, which is a UK-based company providing trading in financial derivatives such as contracts for difference and financial spread betting, points to declining bearish bets on the Japanese yen.
  • IG markets’ retail positions data provide a glimpse to retail traders’ positions, which are largely used a contrarian indicator, since retail positioning moves in opposite direction to market movements.
  • According to data from IG markets, 62 percent of the retail positions are short on USD/JPY, which gives the pair a bullish bias. However, the short positions in USD/JPY has declined from 72 percent at the beginning of the week, which leaves the pair open to correction.  

The focus for the week is on central bank, as the Bank of Japan (BoJ) is set to announce policy decision tomorrow.

 

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