Japanese Yen Dives on Rising Rates and Oil Prices, USD/JPY Bullish

USD/JPY Analysis and Talking Points

  • Japanese Yen Selling Shows Little Signs of Abating
  • IG Client Sentiment Signals Mixed USD/JPY Outlook

Japanese Yen Selling Shows Little Signs of Abating

Another bout of Yen selling overnight with the currency slipping 0.6% against the USD as rate differentials continue to bite. At the same time, firmer oil prices have also added to the negative outlook for the Japanese Yen and will continue to do so. Keep in mind, that Japan is a net energy importer and thus higher oil prices would weigh on the currency. As such, risks remain geared towards further upside for USD/JPY, particularly with the BoJ remaining the last of the doves as emphasized by Governor Kuroda who this morning continued to reiterate that monetary easing must persist. As shown below, with the US 10YR yield breaking back above 3%, this continues to lead the way towards higher USD/JPY, raising the potential for a test of 135.00.

USD/JPY vs US 10YR Yield

Source: Refinitiv

USD/JPY Pivot Points

Japanese Yen Dives on Rising Rates and Oil Prices, USD/JPY Bullish

Source: Refinitiv, DailyFX

IG Client Sentiment Signals Mixed USD/JPY Outlook

Data shows 30.32% of traders are net-long with the ratio of short-to-long traders at 2.30 to 1. The number of net-long traders is 12.02% higher than yesterday and 6.13% lower from last week, while the number of net-long traders -short is 2.85% higher than yesterday and 16.47% higher than last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/JPY prices may continue to rise.

Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed USD/JPY trading bias.

Japanese Yen Dives on Rising Rates and Oil Prices, USD/JPY Bullish

Source: DailyFX

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