USD/JPY risk reversals drop to 5.5-week, signal JPY strength

Three-month USD/JPY risk reversals (JPY3MRR) fell on Monday to the lowest level since Oct. 31, indicating investors are adding bets to position for further strength in the Japanese yen (further losses in the USD/JPY).

At press time, the risk reversals are trading at -1.5 in favor of USD/JPY puts (bearish bets) vs -1.2 seen on Dec. 3.

The USD/JPY is currently trading at 112.48, having bounced off the crucial 100-day MA of 112.27 and if risk reversals are to be believed then the long-term MA support could be breached soon.

JPY3MRR