USD/JPY options: Yen strength to be short lived
|The USD/JPY pair fell to a low of 109.56 on Wednesday before trimming losses to end the day with moderate losses at 110.06 levels. More importantly, the pair once again avoided a daily close below 110.00 levels.
Daily chart
- The chart above shows, the yesterday’s candle has a long lower shadow, which is usually a sign of dip demand.
- The options activity data published by the CME for the JPY/USD September expiry contract show the Yen strength is likely to be short lived.
JPY/USD JPUU7 Open Interest Change: Current (Aug 9 - Prelim) vs Aug 8
- Open interest [OI] in the ITM Put options jumped by 695 contracts. Max additions were seen in 0.00905 Put. The total OI in the Puts improved by 811 contracts.
- Meanwhile, the total OI in the Calls jumped by 395 contracts.
- The fact that investors boosted OI in the ITM Puts [downside bets on the Yen] indicates the investors fear the USD/JPY spot could erase Wednesday’s gains in line with the rising inflation expectations in the US.
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