Market sentiment analysis:
- Trader confidence has fallen since the Federal Reserve surprised markets last week by being unexpectedly hawkish.
- That has boosted the US Dollar all round and, while it is now off its highs, it continues to look firm against the Japanese Yen.
- There is a warning signal although from retail trader positioning data, which are sending out a contrarian bearish signal on USD/JPY.
Trader confidence battered
Traders continue to prefer safe havens to riskier assets in the wake of last week’s surprisingly hawkish comments by the Federal Reserve. That has boosted the US Dollar all round and, even though it has eased from the highs against many other currencies, it continues to trend higher against the Japanese Yen.
At DailyFX, though, we take a contrarian view of retail trader positioning and that means the near-term outlook for USD/JPY could be negative judging by the latest IG client sentiment data.
Source: DailyFX (You can click on the chart for a larger image
The retail trader data show 47.83% of traders are net-long, with the ratio of traders short to long at 1.09 to 1. The number of traders net-long is 10.33% higher than yesterday and 7.93% lower than last week, while the number of traders net-short is 3.23% higher than yesterday and 12.72% lower than last week.
Here at DailyFX, we typically take a contrarian view of crowd sentiment, and the fact traders are net-short suggests USD/JPY prices may continue to rise.Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current USD/JPY price trend may soon reverse lower despite the fact traders remain net-short.
In this webinar, I looked at the trends in the major currency, commodity and stock markets, at the forward-looking data on the economic calendar this week, at the IG Client Sentiment page on the DailyFX website, and at the IG Client Sentiment reports that accompany it.
— Written by Martin Essex, Analyst
Be happy to contact me on Twitter @MartinSEssex