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. 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.