The Japanese Yen’s rally since their move to negative interest rates has been an economic phenomenon that I simply can’t get my head around. Perhaps a case of the government not taking more is akin to losing a foot rather than the entire leg? I suppose my lack of understanding is one of the reasons I follow the collective actions of the commercial traders in the commodity markets. While any individual can be wrong at any given moment, the commercial traders, as a group, have a knack for having the right position on at the right moments. Whether by research or algorithm by hook or by crook, there is little question in our minds which group we should be following. Today, we’ll update you on their most bearish position in the Japanese Yen in more than six years.
We’ve been watching the Japanese Yen’s movement closely this year as it has gained strength against the U.S. Dollar in spite of the actions of the Bank of Japan and their explicit commitment to weakening their currency across global markets in order to prop up their export driven economy. We’ll refer to our story from two weeks ago to provide the deeper history. In the meantime, we’ll update a few data points that should continue to keep you watching for a dramatic turn in the Japanese Yen vs U.S. Dollar currency pair.
Our week started off with a bang. Monday, we discussed how we use the small speculator category of the weekly Commitment of Traders report to pick off failing moves in the markets. The rally in cotton futures set us up beautifully for the sell signal we published at TraderPlanet and we’ve got more than $1,500 per contract in the trade already.
We spent the rest of the week focused on Thursday’s Scottish vote. There’s a very interesting angle playing out among the commercial traders in the currency markets. The Commitment of Traders Report clearly shows that commercial traders are expecting these currency markets to tighten rather than continuing to widen as they have for the last 5-6 weeks.
Our piece on Tuesday for Equities.com touched on the basics in, “Currency Trading the Scottish Secession Vote.”
Finally, our primary piece delved deeper into the same currency analysis, “Currency Reversal on Scottish Vote.” The primary factors for our currency expectations are still in play and we continue to look for the technical pattern that we outlined yesterday.