Nobody may have any interest in shorting the U.S. stock market right now. Yet futures traders are growing increasingly excited about the prospect of shorting certain currencies. In particular, bets that the Japanese yen will fall against the greenback are at their highest levels since the summer of 2007. Granted, a contrarian might think that a high degree of short interest is an indication that Japan’s currency could actually strengthen against the dollar. However, trend analysis suggests otherwise.

The price of the CurrencyShares Japanese Yen Trust (FXY) is below both its 50-day and 200-day moving averages. For most trend-followers, this suggests that yen depreciation may have further to go. From my vantage point, though, I would need to see the yen break through the 52-week lows set back in May. If that turned out to be the case, I might anticipate capital appreciation from WisdomTree Japan Hedged Equity (DXJ). The exchange-traded tracker has had a difficult time recapturing its springtime highs due to the fact that the yen has not quite capitulated.