Japanese Yen Alert

The price decline on Oct 5 in the futures contract completed a 15-week symmetrical triangle on the weekly graph, as shown below.

 

Please note the all-time record long spec COT position and near all-time record short commercial position. Keep in mind that these positions are in the futures market and the commercials may have at least some of their short futures exposure hedged in the spot USD/JPY market. However, my guess is that a similar position profile also exists in spot USD/JPY (spot trades at a reciprocal value to futures, meaning that spec longs in futures would be the same as spec shorts in spot USD/JPY).

 

The decline (so far) today has completed a small 3-day flag on the daily chart with a target of .8671.

 

 

The daily graph below is spot USD/JPY. I have positioned myself in the spot market using protective stops under 102.67. A close under this level would indicate that the daily chart is in the process of morphing — and I have no interest in holding a position in a morphing market. Being long USD/JPY is equivalent to being short Yen futures.

 

 

My hope in this trade is that the specs will be forced to cover their record long futures (short spot) positions.