The Japanese Yen is friendless at the moment and is sinking against a wide range of currencies as the central bank step continues to buy government bonds in size to keep interest rates lower for longer. The Japanese Yen is trading at a fresh 24-year low against the US dollar, a 14-year low against the Canadian dollar, and a seven-year low against the Swiss Franc.

USD/JPY now eyes the august 1998 high at 147.63 as the next upside target….
 

USD/JPY Monthly Price Chart

(Click on image to enlarge)

…CAD/JPY continues to rally towards 125.57….
 

CAD/JPY Monthly Price Chart

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…while the only thing stopping CHF/JPY from trading at a new 42-year high is the January 2015 spike caused when the Swiss National Bank abandoned its three-year-old 1.20 cap against the Euro.
 

CHF/JPY Quarterly Price Chart

(Click on image to enlarge)

While the Japanese Yen is among a raft of currencies affected by the strength of the US dollar, the country’s monetary policy is the driver behind the Japanese Yen’s weakness. The Bank of Japan continues to keep bond yields low and while the central bank may occasionally announce that it is looking at the current Yen value, it does nothing concrete to stem this weakness. The BoJ today announced that it would buy JPY550 billion of bonds at its regular bond operations, up from a prior level of JPY500 billion, as it seeks to keep the 10-year bond yield below 0.25%. As long as the BoJ keeps monetary policy ultra-loose, the Japanese Yen is likely to weaken further.

Retail trader data show that 22.54% of traders are net-long with the ratio of traders short to long at 3.44 to 1. The number of traders net-long is 5.62% lower than yesterday and 4.23% lower than last week, while the number of traders net-short is 0.50% higher than yesterday and 10.62% higher than last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests that USD/JPY prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USD/JPY-bullish contrarian trading bias.

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