The Dollar-Yen pair ended above the 100-DMA on Friday for the first since July 25. The pair clocked a high of 111.33 before trimming gains to close the week at 110.84 levels. The retreat from the high of 111.33 was the result of a weaker-than-expected US retail sales.
JPY/USD Options: Open positions in the Put options spike
| JPY/USD Put Summary | |||||
|---|---|---|---|---|---|
| Total | ITM | OTM | |||
| OI | Chg | OI | Chg | OI | Chg |
| 26,726 | 548 | 10,221 |
84 | 16,505 |
464 |
| JPY/USD Call Summary | |||||
|---|---|---|---|---|---|
| Total | ITM | OTM | |||
| OI | Chg | OI | Chg | OI | Chg |
| 22,208 | (132) | 2,334 |
50 | 19,874 |
(182) |
- The CME data for JPY/USD Oct expiry options shows the open positions in the Put options [bearish bets] increased by 548 contracts on Friday. The Out-Of-The-Money [OTM] Puts added 464 contracts.
- Meanwhile, the open positions in the Call options fell by 132 contracts.
- The options activity clearly points to a bearish bias, i.e. the Dollar-Yen pair is seen extending last week's rally.
The flatter Treasury yield curve is not necessarily USD negative
The difference between the 30-year yield and the 5-year yield narrowed to 96 basis points on Friday, the tightest since July 7, from 103 basis points a week earlier.
The flattening of the yield curve is not necessarily negative for the USD as it was the result of traders pricing-out extreme dovishness at the short-end of the curve, i.e. markets have started pricing-in a possibility of another Fed rate hike in December following the last week's better-than-expected inflation data.
Markets may continue to unwind dovish positioning ahead of the Wednesday's Fed decision, thus USD could remain bid.
Technicals - Eyes 115.00
Monthly chart
- Repeated bearish exhaustion around 108.00 followed by a sharp rebound to 111.30 levels indicates the pull back from the high of 118.66 [Dec high] has ended. The price action adds credence to the argument that the uptick in the Chinese PPI could end up reigniting inflation expectations in the US.
- The spot looks set to test 115.00 - 115.32 [symmetrical triangle resistance].
- On the downside, only a weekly close below 106.00 [monthly 200-MA + symmetrical triangle/rising trend line support] would revive the bearish view.
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