FxWirePro: USD/JPY remains open to correction; retail sentiment points to bullish bias

JPY could gain against the broader bear trend,

• As the USD/JPY struggles to clear key resistance zone of 111.6-112.2, the pair remains open to correction. Unless the resistance is cleared, USD/JPY remains vulnerable to deeper correction riding on risk aversion and the weakness in the USD.
• Equities remain depressed to start the week, and if the selloff extends through the week, the yen is likely to correct sharply lower.
• As long as the resistance zone holds intact, the USD/JPY is likely to drop to as low as 108.2 area.
• However, retail sentiment points to further upside.

Retail sentiment:

• The sentiment reports from IG Markets, which is a UK-based company providing trading in financial derivatives such as contracts for difference and financial spread betting, points to a bearish bias in the yen.
• IG markets’ retail positions data provide a glimpse to retail traders’ positions, which are largely used a contrarian indicator since retail positioning moves in opposite direction to market movements.
• As of today, according to data from IG markets, only 37 percent of retail positions are bullish on GBP/USD, while 63 percent are on the short side, giving bullish bias to USD/JPY.