COT Report Reveals Significant Increase In Yen Net Short Position
- The dollar/yen rate (USD/JPY) once again rallied close to the highest level seen since around April this year, during trading late last week. Further monetary easing rhetoric from Shinzo Abe, the leader of the LDP (Liberal Democratic party) provided a catalyst for a resumption of the recent Japanese yen selling.
- The USD/JPY has been a “hot hand” over recent weeks with the JPY amongst the most popular currencies for shorting. The latest COT report (commitment of traders) data from the Commodity Futures Trading Commission revealed that futures market participants have increased the net open short yen position by around 50%, worth a net $12.2 billion. The report this week showed a net position at -79,466 versus the -51,389 reading on the prior week, the largest net short JPY (CME) position this year and bigger than the -67,622 figure registered in March.
- Traders may be tempted to short the USD/JPY at current so called “overbought” levels, if referencing technical indicators such as the RSI, but the price action and additional near-term technical considerations do not yet point towards an obvious yen corrective strength shift in our opinion.
- The USD/JPY is essentially trading between significant technical levels at present with an element of technical traders possibly sitting on the sidelines waiting for a suitable pullback to support, or move higher to established resistance, as a catalyst.
- The key potential support area we are monitoring, on any sustained downside move, is located around the 80.70 area (see previous resistance = potential support).
- Aggressive USD/JPY bulls may be considering a break above recent highs as a trigger to for longs; however, a descending trend line is located around 70 pips above the closing dollar/yen level from Friday, which may see an element of resistance if hit on any sustained move above recent highs. Further to this is the significant 15/3/12 84.17 swing high which was the start of a near 700 pip drop when last hit.
USD/JPY Daily Chart