Traders, we're back with an updated currency strength meter.
I was reviewing my weekly report and trading watchlist and spotted a couple of opportunities that I thought I'd share.
And you know, I haven't spoken about the Japanese Yen in a while, so here I go.
Risk Sentiment
If you've been watching the stock markets lately you may have seen that most of the top indexes are now approaching all-time highs again. A recovery that many thought wouldn't come, as global uncertainty surrounding the tariffs caused all sorts of turmoil.
But that seems to be changing, today the US and China held trade tariff talks in London, and the market seems to be waiting on for any developments.
The put-to-call ratio which measures options contracts is heading lower which signals investors are getting bullish.
Risk on sentiment tends to see investors leave safe haven currencies such as the Japanese Yen and into risk currencies like the Australian and New Zealand dollar.
Currency Strength Meter
The currency strength meter highlights the Japanese Yen is losing strength going from a neutral 0 to -3, whilst the risk currencies such as the Australian dollar and New Zealand dollar gained strength.
Pairing those currencies together we could look for long opportunities on AUDJPY and NZDJPY.
The price of NZDJPY traded through the bearish channel resistance and above the key resistance level of 87.00. A break and hold above this key area could see a bullish trend form.
Sentiment Shows JPY Weakness
Taking a look at the commitment of trader reports I can see that the large speculators added 10,575 short contracts and decreased long contracts by -2,288.
This tells us that large speculators are reducing their long exposure to the Japanese Yen as of now.
Whether this remains the same, we will have to wait and see. But as for trading opportunities at the moment, I can see some short-term JPY weakness sticking around.
The Japanese economy took a bit of a hit today as GDP growth fell from 2.2% to -0.2%. That's a significant shift in growth and could put plans of a rate hike from the Bank of Japan on pause for a moment.
Final Thoughts
The Japanese Yen is showing up as weak on most fundamental indicators as well as technically. The opposite could be said for the New Zealand dollar and Australian dollar. This could lead to some trading opportunities around these pairs.
