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    Back to the futures: JPY inflows driven by Brexit fears

    The British Pound Japanese Yen and Euro futures made significant changes among large speculators last week, with price moves confirming CFTC data in the final three days of the week after the report was collated. 



    European stocks expanded the divergence away from US stocks by close of Friday with DAX and Euro Stoxx shedding 2.8% and 2.9% on Friday alone. However, whilst stocks remain stubbornly close to their record highs, signs of weakness are appearing as global sentiment now shifts its concerns to the pending EU referendum. 

    VIX, US treasures and Gold benefitted from the increased anxiety, helping to push bond yields lower (as they trade inversely to the underlying treasury). The Japanese Yen was the main beneficiary for such nerves among FX majors. These could be repeatable patterns leafing up to the referendum to is worthy of closer inspection.  




    Speculative positioning has changed significantly among EUR, GBP and JPY bets which is likely due to the pending EU referendum. Interestingly CHF has not seen the same inflows which has now crossed to a slight net-short exposure among large specs, instead pushing the net-long exposure of JPY to a 3-week high. 


    USD: We retain an (eventual) bullish bias whilst above 91.90


    If we are correct in assuming wave 1 was complete with the rather large bearish engulfing candle, then we are likely to experience several reversals on D1 within the body of the engulfing candle whilst wave 2 plays out. This can make it for positional trading on D1 and therefor USD crosses better suited to intraday timeframe trading until the market eventually shows its hand. 

    W1 closed with a bullish piercing line above the 61.8% retracement, yet is still overshadowed by the larger engulfing candle. The 20wk MA and bearish trendline from 29/01 may also cap as resistance in the week ahead, especially if we do see a dovish FED on Wednesday. 



    GBP: Brexit fears help the bearish wedge pattern underway


    The British Pound shed 1.4% on Friday alone, as part of a week which was down 2.3% at one point. Asia trading has since seen a bearish follow-through in line with a stronger Yen to show Brexit fears still likely persist and could be a main driver for the next two weeks. Of course, depending on the outcome, it could persist for many months after too. 


    JPY: Appears set for a break to new highs


    The Japanese Yen has seen a bullish continuation early Asia trading, with a break above 0.951 sending it to its highest level since Jan 2014. The two, prominent bullish engulfing (marabuzo) candles which respected the 0.90 area are part of a rising three bullish continuation pattern which could help send the Yen above 0.969 and 0.9967 if the trend holds. This will make things very interesting for the Bank of Japan as the Yen continues to appreciate leading up to the EU referendum. 




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