USD/JPY pushed to new highs for the year this morning as the market is becoming increasingly one-sided. Positioning and sentiment is approaching the extremes seen in the past three years and we see the risks of a short-term pause increasing. However, longer-term signals remain supportive, as shown in Figure 1 (cloud charts and pattern recognition techniques warn of further gains). While the outlook for EUR/JPY is also constructive into next year, EUR/USD is emerging above its range highs since Q3 and is likely to push higher into year end. In Asia, the Shanghai Composite ended the week on a strongly positive note. We have maintained a bearish view throughout this year, but the more recent warnings have prompted us to change this view as the downtrend of the past 20 months has likely ended.
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Barclays Capital