The dow has found a bit of support here near the 38.2% Fibonacci retracement. We'll likely see the USDJPY take a breather in the face of a Dow bounce.

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The ratio of long to short positions in the USDJPY stands at 2.67 as nearly 73% of traders are long. Yesterday, the ratio was at 1.92 as 66% of open positions were long. In detail, long positions are 39.1% higher than yesterday and 20.6% stronger since last week. Short positions are 0.3% higher than yesterday and 11.4% stronger since last week. Open interest is 25.9% stronger than yesterday and 19.2% above its monthly average. The SSI is a contrarian indicator and signals more USDJPY losses.

It is interesting this time around that USDJPY and USDCHF soared, but the high yielding pairs (AUDUSD, NZDUSD) didn't show equal moves when we had the post NFP dollar selling.

I'm trying to really reconcile what this could mean. It is further interesting because besides the carry and risk aversion aspects of such a move, the fundamentals would really suggest that many of these countries' economies should hold up to an ailing US. Of course, the Japanese economy is heavily dependent on US demand; but the same could be said of the UK and Euro Zone, yet they didn't see 'huge' moves. It makes since that Australia should hold pretty strong since most of their trade goes the way of the Asian giants like China, Japan and India.

Perhaps this could be a reflection of global interest rate sentiment. Maybe expectations for hikes among the more high yielding currencies (US, UK, AUD, NZD, CAD, EUR) is done. At the same time, JPY and CHF wouldn't be too harshly effected if they cooled their monetary engines since they haven't gone very far and it wouldn't necessarily be a big fundamental upset to suggest they would pause in the near-term.

I'm also confused as we see many of these dollar-based pairs near multi-decade or record lows for the dollar; and yet they are holding up while USDJPY and USDCHF (which are in the middle of their ranges) are moving so freely.

Any ideas?

NZDJPY - a 5 wave rally from the bottom (this is a 5 minute chart). Look for a correction but this rally makes it likely that today - or at least the morning - will be a pro-carry day.

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According to our latest dealing data, 69% of retail traders are long USDJPY (long to short ratio is 2.20). Moreover, since last week, retail has been aggressively buying USDJPY (long positions are up by 16.8%). In the past, when retail was long and buying more, the USDJPY has sold off in the following days. The SSI gives us a STRONG SIGNAL TO SELL USDJPY.

Yes, I'm also looking to carry liquidation/Yen strength this week...don't know if it has enough substance yet, esp as DOW managed to close in positive territory...let's see how Nikkei and FTSE respond in the next few sessions...

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"The market can stay irrational longer than you can stay solvent" - Keynes

I agree with the above sentiment; still bearish the Yen crosses, bullish the JPY, on what I expect to be poor market conditions across equity markets and other risk-linked assets.

From a technical perspective, the Dow saw a little bit of a bounce on the 50.0% retracement of its recent bull wave, but a shaky doji formation on the daily chart leaves indecision as king. A continuation of last week's losses could be enough to bust the index below it's 50.0% Fib and towards the 61.8 at 12,895. A close below 13,000 would only accelerate losses.

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According to our dealing desk data, 68% of retail traders are long USDJPY (long to short ratio is 2.11). Moreover, since last week, retail has been aggressively buying USDJPY (long positions are up by 16.3%). In the past, when retail was long and buying more, the USDJPY has sold off in the following days. The SSI gives us a STRONG SIGNAL TO SELL USDJPY.

Carry trade performance update

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67% of retail traders are long USDJPY (long to short ratio is 2.03). Moreover, since last week, retail has been aggressively buying USDJPY (long positions are up by 14.8%). In the past, when retail was long and buying more, the USDJPY has sold off in the following days.

The SSI gives us a STRONG SIGNAL TO SELL USDJPY.

According to our latest dealing desk data, the ratio of long to short positions in the USDJPY stands at 1.97 as nearly 66% of traders are long. Yesterday, the ratio was at 2.70 as 73% of open positions were long. In detail, long positions are 8.3% lower than yesterday and 11.1% stronger since last week. Short positions are 25.5% higher than yesterday and 16.6% stronger since last week. Open interest is 0.8% stronger than yesterday and 20.2% above its monthly average. The SSI is a contrarian indicator and signals more USDJPY losses.

As I mentioned in one of the other forums, I'm looking to sell the USDJPY rallies. I remain unconvinced that this is anything but a corrective move higher, and am prepared to sell the currency on a failure at 114.50. A minor falling intraday trendline and the 61.8 Fib of the 115.70-112.58 move highlight resistance at that mark.

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Carry Trade Basket Performance Update

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hi all,

rumours are circulating that the Japanese PM Abe intends to resign; if this materializes then the USD-JPY may head higher along with the yen crosses. But the carry trade dimension may complicate things: suppose Nikkei tumbles big time and carry trade starts unwinding.

So this could prove to be very interesting indeed.

Any thoughts?

I just came across the article on his resignation on FT.com just a few minutes ago. Crazy.

I think you are right. His resignation will have to be interpreted by the currency market. On the one hand, you have considerations like carry trade and event risk stealing the yen spot light. However, this morning we really don't have any major economic releases scheduled that would inherently upset the risk balance (though the RBNZ's decision due late in the US session would definitely count as a market-moving indicator in current market conditions).

Even discounting exogenous risk flows though, I don't think this announcement would immediately lead to a yen drop. While under normal circumstances the uncertainty could generate a backflow from the yen, this doesn't seem like it would disrupt too many of the FX factors. The Abe government hasn't done much to help the yen through economic and foreign policy. What's more, this won't likely have much of an impact on interest rate policy from the BoJ since they are already hampered by growth fears and credit problems. On the other hand, should the Nikkei plunge 3 percent on the news, that could inadvertently guide the yen higher.

Does anyone know who his likely successor will be? I'm hoping it will be someone a little more attuned to the domestic economy (and hopefully one who has a strong background in economics with an opinion on low interest rates and memory of the similarities between the hyper investment period of decades past).