USD/JPY Forecast: Break below 200-DMA likely, open positions in JPY calls spike

On Thursday, the Dollar-Yen pair suffered the lowest end of the day close since September 26 as the US 10-year Treasury yield fell from 2.34% to 2.31%.

The currency pair extended losses to 111.86 in the European session today; its lowest intraday level since September 26. At the time of writing, the spot is trading at 112.05 levels.

The decline in the pair is largely in line with expectations. The big additions in open positions (open interest) in JPY/USD November expiry call options only adds credence to the bearish view on the USD/JPY pair.

JPY/USD JPUX7 Open Interest Change: Current (Oct 12 - Prelim) vs Oct 9

Call Summary
Total ITM OTM
OI Chg OI Chg OI Chg
28,395 1,144 2,322 85 26,073 1,059

 

Put Summary
Total ITM OTM
OI Chg OI Chg OI Chg
26,101 -260 7,307 -115 18,794 -145

 

  • The open positions in JPY/USD calls increased by 385 contracts on Thursday. Over the last three trading days, the open positions in JPY calls have gone up by 1144 contracts. On the other hand, open positions in JPY puts fell by 260 contracts in the previous three trading days.
  • The changes in open positions clearly show a bullish bias on the Japanese Yen (indicates investors are expecting a sell-off in the USD/JPY pair).

Daily chart

  • Rounding top pattern
  • The 14-day RSI is unwinding gains and looks set to drop below 50.00
  • Bearish directional movement index (DMI) crossover
  • 200-MA support is lined up at 111.80

The spot is likely to breach support at 111.80 and move lower to 111.00 levels. Only a super strong US retail sales control group data may save the day for USD bulls.

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