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Japanese Yen – Retail forex traders remain aggressively long the US Dollar against the Japanese Yen, and real risk of a USDJPY breakdown warns against joining them.
Trade Implications – JPY Pairs: The Yen stands at a potential crossroads as it trades at a confluence of Fibonacci, trendline, and 200-day SMA support. If it does indeed break lower, things could get ugly quickly as recent CFTC Commitment of Traders data shows that large futures speculators remain heavily short JPY futures (long USDJPY).
The fact that retail traders their most long USDJPY since its August low is in itself a sign of potential price and sentiment extreme. But a break of major support would clearly favor further USDJPY downside.
Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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