FxWirePro: USD/JPY remains open to further decline; retail sentiment in favor

Yen to shine brighter against USD,

• After last week’s sharp rise, the yen remains well-bid on Monday, as the safe haven currency continue to benefit from a risk-aversion stemming from weakness in the global economy.
• Moreover, the yen is also benefiting from a weaker USD on Monday.
• After a brief weakness today, the yen has started strengthening after a decline to 110.25 per USD. Currently trading at 110 per USD.

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, strongly suggest that yen is likely to rise further against the USD.
• 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.
• As of today, according to data from IG markets, 44 percent of retail positions are bullish on yen, while 56 percent are on the short side, suggesting further upside possibility for the yen against the USD. 

Trade idea:

• Our calculations suggest that USD/JPY is likely to decline to as low as 108.3 per USD. However, expect strong buying around 109.1 area