USD/JPY options: Yen strength to be short lived

Omkar Godbole FXStreet Contributor

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.

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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