26 May 2015
Why there is reason to believe Yen bears are back?
FXStreet (Bali) - Recent data from the CFTC Commitment of Traders Report for the week ending Tuesday May 19, and for that matter, since early May, shows that institutional investmentors, aka big boys, are starting to commit once again into Yen short bets, as USD/JPY keeps flirting with 121.70/122.00 key resistance.
In the last futures positioning report - May 19 -, we have seen an important pick up in open interest from 193,296 up to 231,658, which represents a 19.85% increase, which translates into the largest weekly rise this year. The new committal stance by market participants in the last week does not originate from an addition of large specs though, as one need to refer back to the week ending May 5th to see a clear sign of Yen bear bets re-entering the market. In that week, we saw large specs aggressively joining the offer by going from 5,493.00 contracts short to 31,183.00.
Ever since, while the total amount of large specs has been reduced to 22,005 contracts, that pick up in open interest emanates, in large part, from total dealer longs (net hedging type of players), consistently increasing from neutral in the week ending April 28th, to currently stand at 47,499 total contracts, suggesting that these market makers are providing new means of Yen supply to market participants, overwhelming dealer short contracts (sources of demand for the Yen market).
What is more, asset managers seem to have also regained their conviction on playing Yen short-side bets, as shown by the latest tendencies, in which the stats went from 3,807 Yen long contracts in April 28 to currently stand at 5,640 short contracts, after 3 weeks of consistently adding to the short side.
Lastly, commercials have been buying Yen on the way up, but the rate of weekly change nor the % against total open interest seem to suggest that these type of players may be signaling a possible top on the market. When we see weeks in which the markets ends up lower on commercial selling, major changes in the pace of commercial activity or % commercial selling vs open interest reaches extreme readings, only then there is a reason to believe that commercials may be communicating something worth paying attention. At this point though, that's not the case..
In the last futures positioning report - May 19 -, we have seen an important pick up in open interest from 193,296 up to 231,658, which represents a 19.85% increase, which translates into the largest weekly rise this year. The new committal stance by market participants in the last week does not originate from an addition of large specs though, as one need to refer back to the week ending May 5th to see a clear sign of Yen bear bets re-entering the market. In that week, we saw large specs aggressively joining the offer by going from 5,493.00 contracts short to 31,183.00.
Ever since, while the total amount of large specs has been reduced to 22,005 contracts, that pick up in open interest emanates, in large part, from total dealer longs (net hedging type of players), consistently increasing from neutral in the week ending April 28th, to currently stand at 47,499 total contracts, suggesting that these market makers are providing new means of Yen supply to market participants, overwhelming dealer short contracts (sources of demand for the Yen market).
What is more, asset managers seem to have also regained their conviction on playing Yen short-side bets, as shown by the latest tendencies, in which the stats went from 3,807 Yen long contracts in April 28 to currently stand at 5,640 short contracts, after 3 weeks of consistently adding to the short side.
Lastly, commercials have been buying Yen on the way up, but the rate of weekly change nor the % against total open interest seem to suggest that these type of players may be signaling a possible top on the market. When we see weeks in which the markets ends up lower on commercial selling, major changes in the pace of commercial activity or % commercial selling vs open interest reaches extreme readings, only then there is a reason to believe that commercials may be communicating something worth paying attention. At this point though, that's not the case..