Yen's "armadilla": Speculating Positioning Can Cause Explosion in USD/JPY

[Igor Pereira]

The IMM (International Monetary Market) future positioning chart we analyze tells an extreme risk story for those who are betting on the valuation of the Yen.

By Igor Pereira

Due to the halt of the US government (Shutdown), we were operating without this data. Now that they've been released, reality has come to light: The market is full of Yen buyers.

1. The Multidão Is Purchased (Net Long): The purple line (NET) and the pink area in the graph show that speculators have been accumulating positions of Purchase of Yen (Betting that yen will rise and USD/JPY will fall) since the beginning of the year. Even with the recent sale on December 2, the accumulated stock of purchased positions is still massive.

2. The Danger of Long Squeeze: When "everybody" has bought it, there's no one left to buy more and push the price in favor. The market gets heavy. If the price goes against this crowd, panic sets in.

You identified the risk perfectly: "if the dollar/yene exchange rate reaches a new maximum, it is possible that the yen will quickly devalue itself".

• The Movement Mechanics: If USD/JPY breaks down the resistance and makes a new maxim, all those funds and speculators that are "Bought in Yen" will be at loss.

• The Domino Effect: To stop the damage, they will be forced to close their positions.

  • Include purchase of Yen = Sell Yen (Buy Dollar) .

  • This creates an artificial and violent buyer flow in USD/JPY, making the price shoot not on grounds, but by forced settlement of positions.

This scenario of Contrary Feeling Give us a clear map:

1. Sales Care in USD/JPY: Don't try to guess the top. With the market positioned for the fall (purchased in yen), any high will be amplified by stops The speculators.

2. The Breakup Trade: If USD/JPY breaks the recent maximum, wait for a quick acceleration. The target is not technical, it is liquidity (where are the fund stops).

3. Cross Pairs (EUR/JPY, GBP/JPY): If the yen melts due to this squeeze, these pairs tend to rise even faster than the Dollar, as they capture Japan's pure weakness.

Summary: The market is at the wrong end of the trade. If the Dollar gains strength, we will see a race to the exit door that will cause the Yen to collapse quickly.

1. Macro context: The Wyckoff Cycle

When analyzing the macro structure, we clearly identified a distribution pattern at the recent top history. The marking of UTAD (Upthrust After Distribution) in the region of 161,951 signals that there was a stop-hunting of top buyers, followed by a strong rejection. This movement generally precedes a reversal of trend or a deep correction, confirming that Smart Money has already made profits in these maxims.

2. The Battle in the CHOCH Zone

Currently, the price works in the range of 155.750, entering the upper gray zone marked as CHoCH (Change of Character).

• What does that mean? This region (between 155,000 and 158,000) represents the previous structural breakdown. The return on the price at this level is technically a "offer test".

• Current Pattern: Note the formation of a small flame or high wedge just below the resistance of 158,882. The market is compressing. If the sellers successfully defend this region of CHoCH, we will confirm the top down.

3. Key Levels for Support and Resistance

For the trader seeking positioning, it is essential to monitor the following prices plotted on the chart:

• Immediate Resistances:

  • 158,882: The gateway to the upper liquidity.

  • 160,718: The last barrier before the top maximum (UTAD).

• Critical Supports:

  • 149,255 / 149,451: This is the first level of "breathing room". If the price fails to break the current resistance, this is the bear's first target.

  • 142.113 and SOW zone: The lower region (marked as SOW - Sign of Weakness) around 140,000 is the macro target if the distribution structure is fully confirmed.

What to Expect and Impact on the Market

Volatility should increase in the next few days. We're seeing an interaction with the Mobile Mediums, which are serving as dynamic support pushing the price against CHoCH's resistance.

• Bullish scenario: A strong weekly closure above 158,882 It would invalidate the immediate selling pressure, paving the way to retest the 160,000. This would indicate that Yen remains undervalued in the face of the dollar force and the previous "intervention" was absorbed.

• Bearish scenario: The rejection in this area of 155,000 - 158,000, combined with a reverse candle (such as a Pinbar or Lower Swallow in W1), would confirm respect for the Wyckoff structure. The primary target would be the return to average and support of 149,255.

Conclusion for Traders: Patience is the key. Buying now is risky, because we are in the face of institutional resistance. The best risk/return opportunity arises in confirming rejection of this CHoCH area for sales, or in the confirmed breakup for short purchases.

Keep your risk management sharp. The sovereign market and structure break You always make the rules.