RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

For the past couple months we’ve been kind of hands-off this market because of the prospects of aimless, whipsaw-type behavior typical of the middle-halves of lateral ranges.  But for longer-term sentiment reasons we’ll discuss below and because of a new and tighter short-term risk parameter resulting from Fri’s break below 24-Jul’s 110.62 low detailed in the 240-min chart below, we believe this market is now presenting a favorable risk/reward opportunity from the bear side.

Indeed and as a direct result of Fri’s resumed intermediate-term downtrend, the market has identified 26-Jul’s 112.20 high as the latest smaller-degree corrective high this market now much recoup to break the past three weeks’ slide and expose another intra-range whipsaw higher.  In lieu of such 112.20+ strength further and possibly surprising losses are now expected.  Per such 112.20 is considered our new short-term risk parameter to a cautious bearish policy.  Former upper-110-handle-area support is considered new near-term resistance ahead of further losses straight away.

Japanese Yen Index 240 min Chart


Japanese Yen Index Daily Chart

The daily chart above shows the market still constrained within the middle-half bowels of the past four months’ range that remains deep, deep within the middle-half of the past TWO YEAR range shown in the weekly chart below.  The POTENTIAL for a bullish divergence in momentum is clear in the daily chart, but only proof of strength above 112.20 will CONFIRM this divergence to the point of non-bearish action like short-covers.  So while we still want to acknowledge and respect the odds of continued aimless whipsaw risk typical of such range-center conditions, strength above at least 112.20 can now be objectively required to reaffirm this condition.

What’s also clear in both of these charts is 3-wave recovery attempt from 17-Apr’s 108.13 low.  Left unaltered by a recovery above 11-Jul’s 114.50 high, this 3-wave recovery is considered a corrective/consolidative structure that warns of a resumption of Dec-Apr’s downtrend that preceded it.  In this regard we’re identifying that 114.50 high our new long-term risk parameter to a bearish policy.

A contributing factor to a bearish tilt from current range-center conditions has been the deterioration in our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC.  At a current 18% reading reflecting just 24K longs to a whopping 109K shorts in the yen futures contract shown on our CFTC page, this indicator represents the most bearish stance against the yen since Dec’15 that warned of and accompanied a major peak/reversal environment in the USDJPY.  This fuel for downside vulnerability in the USD is once again in ample supply and warns of potentially surprising USD losses until threatened by a recovery above at least 112.20 and preferably 114.50.

Japanese Yen Index Weekly Chart


These issues considered, traders are advised to move to a cautious bearish policy and exposure from the current 110.60-area OB with a recovery above 112.20 required to defer or threaten this call enough to warrant returning to a neutral/sideline position.  In lieu of such 112.20+ strength, further and possibly accelerated losses should not surprise.

Japanese Yen Index Monthly Chart

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