This text is from blog famous currency strategist Joel Kruger .
ONLY ONE WAY TO GO FROM HERE – I am honestly not sure why anyone would be interested in buying the Yen (selling USD/JPY) at current levels. This is a market that has been in the process of carving out a major base off of the 2011 record lows, that looks to now finally be gaining some bullish momentum. Today’s push back over 80.00 is significant, as it is the first time in several months that the pair has traded above the psychological barrier. This could inspire sizable profit taking on longer-term institutional shorts, while at the same time, opening the door for the establishment of some meaningful macro long positions.
See Joel’s daily forex technical outlook video:
CHARTING THE JAPANESE ECONOMY
SIGHTS SET ON RETEST OF 2012 HIGH – I have been forever writing about my bullish outlook for USD/JPY, citing a combination of compelling longer-term technical studies and disturbing Japanese fundamentals. The Yen is anything but a safe haven currency and with the local economy historically benefiting more from a weaker Yen anyway, we should expect to see significant Yen weakness (USD/JPY upside) in the months ahead. The Wall Street Journal was out highlighting the case for Yen weakness on Monday in an article entitled “Yen Losing Safe Haven Mantle,” and perhaps a bit of press could help to accelerate Yen declines. Key resistance now comes in at the 2012 (84.20) high, and I will be looking for a test and break of this level before year end.
DISCOURAGING ADVICE FOR RETAIL TRADER
THE GREAT CONTRARIAN INDICATOR – Moving on, looking at the rest of the market, things are expected to pick up a bit following a slow Monday start. My bias continues to favor broad based USD strength, and I will be watching closely to see if EUR/USD can put in a daily close back under 1.3000. A close below 1.3000 would be quite bearish, and would likely expose a direct retest of the October low at 1.2800 further down. I am also looking for ongoing underperformance in the commodity bloc currencies and have been delighted to see that retail traders are now actually net long both CAD and Aussie against the buck. Retail trader positioning has proven to be a formidable contrarian indicator, and with retail recently flipping to net short USD/CAD and net long AUD/USD, we can expect to see more USD/CAD strength and AUD/USD weakness ahead.