The mystery in the CFTC Commitments of Traders report was the jump in USD/JPY longs.
The weekly CFTC positioning data showed some major swings this week. Most of the moves weren't a big surprise; a drop in AUDUSD shorts after the RBA moved to a more wait-and-see stance is understandable.
The one that jumped out was a surge in yen shorts to 31K from 5K when nothing particularly notable happened in the pair. It remains well-within the 2015 range.
USDJPY daily
So why the shift into longs?
Look to the bond market. Even with yields moving higher around the world, the Japanese bond market is so saturated with central bank bids (and a lack of liquidity) that yields there remained pinned to the floor. In the US, 10-year yields are up 11.5 bps today to 2.26% and poised for the highest close of the year.
If bond yields continue higher, USD/JPY will continue to rise as well.
Personally, I like the look of USD/JPY longs. It's the kind of trade where you can start small and continue to add if/when it breaks to the upside.
