📈 USD/JPY - JULY 05 - Bullish Bias, but Risky CoT Positioning
Updated
Daily update for USD/JPY for July 05. Here is what you need to know to trade today.
FUNDAMENTALS:
The US NFP release led to strong selling pressure in the USDJPY pair, which was partly the result of profit-taking in the USD after the pair reached near multi-year highs.
The JPY is the weakest currency for the last 2 weeks, but the absence of major market reports this week (and the US holiday today) could mean that the pair will remain within familiar ranges.
There aren't many reasons to believe that US yields won't rise again after a strong NFP number, despite falling unemployment rates.
The USDJPY pair should overall remain well bid during the day/week.
Latest Headlines:
JPY News:
-USD/JPY struggles for direction, holds steady around 111.00 mark
-USD/JPY now seen within 110.60-111.65 – UOB
-BOJ raises economic assessment for two of Japan's nine regions
-BOJ maintains assessment for 5 of 9 Japanese regions in latest economic report
-USD/JPY Price Analysis: Struggles to defend 111.00 inside fortnight-old rising channel
-Japan Jibun Bank Services PMI up to 48 in June from previous 46.5
USD News:
-US Dollar Index remains on the defensive near 92.20
-US Dollar Index Price Analysis: DXY probes rising wedge breakdown above 92.00
-US inflation expectations fade recovery moves
-Fed and ECB events to keep an eye on this week
Upcoming Market Reports:
Here are the most important market reports for USD/JPY to follow in the coming days (all times are UTC timezone):
Monday at 12:00: USD Bank Holiday
Tuesday at 14:00: USD ISM Services PMI (Expected: 63.9, Previous: 64.0)
Wednesday at 14:00: USD JOLTS Job Openings (Expected: 9.34M, Previous: 9.29M)
Wednesday at 18:00: USD FOMC Meeting Minutes (Expected: , Previous: )
Thursday at 12:30: USD Unemployment Claims (Expected: 375K, Previous: 364K)
Thursday at 15:00: USD Crude Oil Inventories (Expected: , Previous: -6.7M)
INTERMARKET:
Nikkei 225 and yield differentials point at some weakness in the pair from an intermarket standpoint.
SENTIMENT:
CoT:
The latest CoT report showed that leveraged money increased their bearish bets on JPY, while simultaneously reducing their bullish bets, to reach an almost 3-year extreme. The last time the bearish positioning was this high (March 2020) marked the start of a significantly strong bear trend in the USDJPY pair.
Note that the net short positioning in USD decreased slightly from extreme levels after the Fed's hawkish shift, signaling the risk of a short-squeeze.
Positioning is bearish for USDJPY.
Currency Strength for the Last 2 Weeks
TECHNICALS
Price-Action:
The pair is trading in an uptrend on the 1-hour chart and touched a rising trendline support, where buyers pushed the price higher this morning. The pair broke below the 61.8% Fib but recovered some ground recently, which could signal a dip into liquidity by large market participants. However, bear in mind that US markets are on holiday today, which means lower liquidity overall.
Levels to follow (Liquidity):
Major resistance: 111.65
Minor resistance: 111.16
Minor support: 110.80
Major support: 110.42
== SUMMARY ==
I am interested in trading USDJPY from the buy side, but the extreme positioning in the futures markets and the possibility of USD short squeezes pose a risk for bulls in the coming period.
Please hit the 'LIKE' button if you find this post useful. Also, don't forget to follow to get more trade ideas like this. Thanks!
FUNDAMENTALS:
The US NFP release led to strong selling pressure in the USDJPY pair, which was partly the result of profit-taking in the USD after the pair reached near multi-year highs.
The JPY is the weakest currency for the last 2 weeks, but the absence of major market reports this week (and the US holiday today) could mean that the pair will remain within familiar ranges.
There aren't many reasons to believe that US yields won't rise again after a strong NFP number, despite falling unemployment rates.
The USDJPY pair should overall remain well bid during the day/week.
Latest Headlines:
JPY News:
-USD/JPY struggles for direction, holds steady around 111.00 mark
-USD/JPY now seen within 110.60-111.65 – UOB
-BOJ raises economic assessment for two of Japan's nine regions
-BOJ maintains assessment for 5 of 9 Japanese regions in latest economic report
-USD/JPY Price Analysis: Struggles to defend 111.00 inside fortnight-old rising channel
-Japan Jibun Bank Services PMI up to 48 in June from previous 46.5
USD News:
-US Dollar Index remains on the defensive near 92.20
-US Dollar Index Price Analysis: DXY probes rising wedge breakdown above 92.00
-US inflation expectations fade recovery moves
-Fed and ECB events to keep an eye on this week
Upcoming Market Reports:
Here are the most important market reports for USD/JPY to follow in the coming days (all times are UTC timezone):
Monday at 12:00: USD Bank Holiday
Tuesday at 14:00: USD ISM Services PMI (Expected: 63.9, Previous: 64.0)
Wednesday at 14:00: USD JOLTS Job Openings (Expected: 9.34M, Previous: 9.29M)
Wednesday at 18:00: USD FOMC Meeting Minutes (Expected: , Previous: )
Thursday at 12:30: USD Unemployment Claims (Expected: 375K, Previous: 364K)
Thursday at 15:00: USD Crude Oil Inventories (Expected: , Previous: -6.7M)
INTERMARKET:
Nikkei 225 and yield differentials point at some weakness in the pair from an intermarket standpoint.
SENTIMENT:
CoT:
The latest CoT report showed that leveraged money increased their bearish bets on JPY, while simultaneously reducing their bullish bets, to reach an almost 3-year extreme. The last time the bearish positioning was this high (March 2020) marked the start of a significantly strong bear trend in the USDJPY pair.
Note that the net short positioning in USD decreased slightly from extreme levels after the Fed's hawkish shift, signaling the risk of a short-squeeze.
Positioning is bearish for USDJPY.
Currency Strength for the Last 2 Weeks
TECHNICALS
Price-Action:
The pair is trading in an uptrend on the 1-hour chart and touched a rising trendline support, where buyers pushed the price higher this morning. The pair broke below the 61.8% Fib but recovered some ground recently, which could signal a dip into liquidity by large market participants. However, bear in mind that US markets are on holiday today, which means lower liquidity overall.
Levels to follow (Liquidity):
Major resistance: 111.65
Minor resistance: 111.16
Minor support: 110.80
Major support: 110.42
== SUMMARY ==
I am interested in trading USDJPY from the buy side, but the extreme positioning in the futures markets and the possibility of USD short squeezes pose a risk for bulls in the coming period.
Please hit the 'LIKE' button if you find this post useful. Also, don't forget to follow to get more trade ideas like this. Thanks!
Note
Typo: In the Sentiment section, the sentence that reads "Positioning is bearish for USDJPY" should be reading "Positioning is bullish for USDJPY".
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