Key Factors Favor a Much Higher Breakout
08/01/2014 9:00 am EST
A significant shift in trader sentiment warns that the US dollar may be poised for a major breakout, but, as David Rodriguez of DailyFX.com points out, so few are actually expecting one.
USD/JPY—A significant shift in trader sentiment warns that the US dollar may be on the cusp of a major breakout versus the Japanese yen.
Trade Implications—JPY Pairs: The USD/JPY consolidated for just over six months and is attempting to breakout. We sense a bit of déjà vu; we saw a very similar stretch of range-bound price action in 2013 before making a 700-point run towards multi-year peaks.
An oversimplified extrapolation puts the USD/JPY as high as ¥109 in two months’ time. Though this admittedly seems unlikely, the substantial swing in sentiment suggests this could be the start of a much larger move. The fact that so few expect the major breakout may, in fact, make it more plausible.
By David Rodriguez, Quantitative Strategist, DailyFX.com