See a video on why we use the Speculative Sentiment Index as a contrarian indicator in our trading
USDJPY – Retail FX traders remain steadily long the US Dollar versus the Japanese Yen and have remained long since June. Normally we would treat this as a contrarian indicator; the fact that most are long would make us take the opposite position and look to go short. Yet it’s likewise clear that traders have done reasonably trading the wide range in the USD/JPY through recent months.
As we note in our video guide on the SSI, we look to sentiment to catch major swings in price action. It’s possible that the USD/JPY sees substantial swings following the US Federal Reserve interest rate decision—in which case we would take an interest in overall positioning. Yet we’ll likely continue to place little weight on the SSI reading for the USD/JPY until it breaks out of its long-standing trading range.
See next currency section:AUDUSD - Australian Dollar Downtrend Intact, but for How Long?
Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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