Did Mrs. Watanabe Make A Killing In The Yen?

| About: CurrencyShares Japanese (FXY)

Yesterday, Bloomberg reported that the legendary Japanese forex trader, Mrs. Watanabe, is taking profits in her long AUDJPY positions. No doubt a lot of money was made in the three-month move from November to February when the A$ went from 83 to over 97, but was she able to catch the whole move?

Yes, there was a lot of money made on this run. Last week, there were rumors that George Soros and other macro hedge funds cleaned up, but did small traders really have the courage to take a large position and then ride it all the way to the top? Our studies in the COT reports show the spec traders did take a big short yen position in the futures and option markets, but the biggest position of almost 141K contracts was in the report from December 4th, when the yen was still worth 84 to the USD. As the market rallied from 84 to 95, the specs stayed short, but they liquidated some of their positions as the market rallied.

Just who is Mrs. Watanabe? As best as I can tell, she is a folklore forex legend who supposedly made a fortune successfully trading the yen and outwitting Goldman (NYSE:GS) and Deutsche Bank (NYSE:DB) trading around 2007. Traditionally, the Japanese were frugal savers, and in many families, the lady was keeper of the savings. As the online retail forex market grew in the last decade, so did the number of Japanese traders. A publication from August 2007 claimed the "Japanese retail forex market is especially important because it is bigger than the retail markets in the rest of the world combined."

It is hard to believe the Japanese forex trade was that big, and it is no longer as big as claimed. However, our support people for Cash Back Forex include Japanese-speaking people in both Ireland and Japan, and recently, there has been an increase in interest and trading of forex markets from many areas.

There are some things about the Bloomberg story I find strange. They claim:

"Japanese investors are selling record amounts of Australian debt, betting a rout in the yen that sent it to a four-year low against the Aussie dollar has run its course. The biggest investors in Australia's bonds cut holdings by 652.6 billion yen ($7 billion) over November and December, the most in Ministry of Finance data going back to 2005."

It sounds like this information was furnished by banks and or brokers, and often, the information you get is something that serves the purpose of the one releasing the info. Remember, there was a big speculative long in this market, too, and it is probably the commercial bankers as well as other owners of the yen. Maybe this info is being fed to the press because they want the market to sell off so they can buy it.

Something else is peculiar with this story. Is cutting your position by $7B such a big deal? And when the Australian bonds are sold, then the A$ needs to be sold and the yen bought. Selling in the A$ seems orderly, and buyers in the yen have been scarce.

PM Abe, like ECB President Draghi, has been successful in achieving results with words. After the G20 meeting, it is no longer acceptable to talk about currency relationships. Those changes must be the result of economic actions to stimulate the economy. Usually, time is required for results to be achieved. What then happens to the yen as we wait for the new Bank of Japan officials? Perhaps the contributors to the Bloomberg article will get some relief, and the market sells off.

For a bull, the USDJPY (NYSEARCA:FXY) weekly chart is truly a thing of beauty. I don't think I have ever seen a 14 week RSI at 87 before, and this is more overbought than the weekly AUDJPY at a mere 79. Japanese Prime Minister Shinzo Abe has done a fine job talking the yen lower, but now that the G20 wants no more currency trash talk, it may be time for a bit of a sell-off.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.