USD/JPY: Bull Run Off 107.50 Backed Up by Jump in Open Interest
Preliminary data from the CME Group shows that futures traders have been adding new long-sided business in the 6J contracts (USD/JPY)
during this week, suggesting that the current rebound off 107.50 is
being driven by what appears to be a genuine buying campaign by large
players, including leveraged funds, asset managers and commercial
accounts.
Open interest: Real buying seen in USD/JPY
While
on Monday April 11th we saw barely any change in open interest in the
6J contract in a day when USD/JPY found what has now become a temporary
bottom just ahead of 107.50, by Tuesday April 12th, the open interest
increased by 6.2k contracts, a day where price action in the pair
printed a bullish daily candle from 107.90 up towards 108.50, confirming
that the up-move had elements of new business long-sided added. Lastly,
CME just published preliminary data for Wednesday April 13th, in which
it confirms, once again, that the 80+ pips move seen yesterday came
backed up by a jump of 4.9k contracts in open interest, resulting in an
overall total combined open interest of 178,477.
Intrinsic value higher, USD/JPY adjusting
The
tentative bottom sub 108.00 came at a time when the spread between the
10-year US Treasuries and the Japanese bonds was starting to present an
attractive divergence in favour of USD yields, further cementing the
notion that new long-sided business off recent lows could have been
perceived as genuine value at a severely discounted price. In other
words, it looks as though the market has finally come to realize that
recent price value and intrinsic value was 'out of whack' and needed an
adjustment in favour of USD/JPY appreciation; the increase in open
interest during days of bullish moves in USD/JPY suggests so.
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