USD/JPY Breakdown: Is 140 the Next Target? Smart Money Says Yes!

USD/JPY is currently in a highly interesting technical and macro phase, characterized by divergences between price action and institutional positioning, negative seasonal signals, and retail sentiment that goes against what would typically be expected in a reversal scenario. Let’s break it down:

1. Institutional Positioning (COT Report)
The COT data reveals a mixed picture with bearish implications for USD/JPY:

On the USD side, non-commercial traders continue to increase their net long exposure (+2,044 new long contracts this week). However, this rise is almost equally offset by +1,975 new shorts, indicating indecision and hedging activity.

For the Japanese Yen, non-commercials (speculators) are significantly rebuilding long JPY positions, while commercials have started covering their short exposure.

📌 Implication: The net flow favors the Yen, meaning bearish pressure on USD/JPY. The increase in JPY long positions reflects expectations of a stronger Yen in the short to medium term.

2. Historical Seasonality
Seasonal data reinforces the bearish bias:

In May and June, USD/JPY has historically posted negative returns.

The 5-year average shows -0.57 in May and -0.76 in June, with both the 2Y and 10Y averages confirming a similar downward seasonal pattern.

📌 Implication: The current seasonal window does not favor a USD rebound vs. the Yen. Historically, the likelihood of downside increases into early summer.

3. Retail Sentiment
Retail traders are heavily long, with 64% positioned long on USD/JPY versus 36% short.

📌 Implication: From a contrarian perspective, this is a bearish signal. Markets tend to move against retail positioning, adding further downside risk.

4. Price Action & Technical Structure (Daily Chart)
On the weekly chart:

Price broke the key 144.00 support decisively, closing the week at 142.81.

Structure shows lower highs and lower lows, typical of a bearish trend.

RSI is falling but still above oversold levels, leaving room for further downside.

First demand zone: 141.50–142.20. A confirmed break could open the way to 140.00–139.80.

Key resistance on any pullback: 145.00–146.00.

📌 Implication: The confirmed break of support activated a bearish continuation setup, unless short-term bounces offer new sell opportunities near resistance.

5. Market Depth
Market depth shows a strong cluster of long orders above current levels, while short volumes appear fragmented. This suggests any short-term rally could face aggressive selling between 144.50–145.50.

🎯 Conclusion & Operational Outlook
The overall context points to a high probability of further downside in USD/JPY over the short to medium term:

Smart money is rotating toward the Yen.

Seasonal patterns historically support a drop in May–June.

Contrarian retail sentiment adds additional bearish weight.

The weekly chart confirms a break of structure, opening space below 141.50.