Yen Futures Positioning Indicates Reversal Potential

US Dollar Index: Implied net positioning fell significantly again last week and the trend remains towards US dollar selling. Positioning has not reached a bearish extreme so continue to favor the downside.

EUR: The interpretation of the data is the same for the euro, but in the opposite direction. After falling from extreme levels, euro longs increased sharply again last week, which sets the stage for a test of 1.3680.

GBP: British pound longs increased slightly and are at a new record. The record for speculative longs as well as the extremely low commercial demand favors a turn. Now is the time to look for a top and reversal in the Pound crosses (a bottom in EURGBP).

CHF: CHF short positions continue to decrease from extreme levels, signaling that the CHF should strengthen for an extended period. A top is in place at 1.2476 and the path of least resistance is down.

JPY: JPY net positioning increased from record bearishness but the risk of a reversal remains high. The chart above shows that the previous two records of extreme bearishness led to reversals. The psychological backdrop is ripe for a reversal again so be on the lookout for a top in the JPY crosses, especially the GBPJPY and CADJPY.

CAD: Net positioning regarding the CAD fell slightly from the record bullishness of the week before. The CAD is in the process of forming a top (USDCAD bottom).

AUD: Net positioning in the Aussie fell from 66,975 to 58,097 last week. There is little evidence that the Aussie is topping out. Tops are almost always accompanied by extreme positioning and positioning is not at a bullish extreme. There is no reason to fade the uptrend.