The dollar may bounce from a 15-year trough against the yen in the near term due to technical factors and overstretched speculative positioning, but the options market shows potential for a grind toward fresh lows.

Light positioning and low levels of implied volatility indicate a rather relaxed attitude to the current dollar/yen spot rate, with risk-reversals still favoring further yen gains, traders and strategists say.

Falling U.S. bond yields have driven dollar/yen down, pushing it to the 15-year low on Wednesday, the day after the Federal Reserve said it would reinvest proceeds from mortgage backed securities into government debt, exacerbating worries about the U.S. economic outlook.

The fall in spot has prompted an escalation in currency rhetoric from Japanese officials, though analysts see likely options as limited. Asked if foreign exchange intervention was an option, Finance Minister Yoshihiko Noda declined to comment.

Technical analysts say the dollar is in a clear long-term downward trend against the Japanese currency, as it trades well below its daily moving averages and its daily Ichimoku Cloud.

Ichimoku is a widely-used Japanese indicator used to gauge momentum, along with future areas of support and resistance.

However, a short-term correction could well be on the cards before any move toward the all-time low.

A short-term correction can stretch to the 21-day moving average and the downtrend from the June 4 high around 86.54 yen, but in the long term the trend is down and I see only minor support ahead of the all-time low near 80 yen, said MacNeil Curry, technical analyst at Barclays Capital.

Curry highlighted a hammer-reversal pattern on the daily dollar/yen chart, suggesting short-term exhaustion within the current trend. He noted only minor support at 84.50 and 83.90 before the all-time low around 79.75 yen, hit in April 1995.

Speculative positioning also points to a potential near-term correction to the upside, with yen longs standing close to a record, according to IMM data.

LOW VOLATILITY

The move to a 15-year low has not produced a significant increase in implied options volatility, suggesting the market is not expecting any sharp moves in the near future.

One-month implied dollar/yen volatility stands around 11.50, edging slightly higher on the week. However, this remains well below levels seen in May of this year at the height of the euro zone sovereign debt crisis, when one-month volatility hit the year's high near 18.50.

While we do not foresee an immediate rebound, we continue to believe that the yen is trading toward the top end of its ranges and we favor selling implied volatility to spot positions, Citibank analysts said in a note to clients.

Risk-reversals, a measure of the premium required to hold a put or a call in a currency pair, continue to show a bias for further dollar/yen downside but, in a similar fashion to implied volatility, they remain well off their 2010 highs.

The one-month 25-delta risk-reversal stands at around 1.55 in favor of yen calls, having peaked in May around the 2.5 area, indicating the market may be positioning for a slow grind lower in dollar/yen, rather than a sharp move.

Positioning in the options market can often be a clue to how spot will react at a certain level.

Traders said there were option barriers at 84.50, 84.25 and 84.00 which could slow yen gains, but analysts said there were no major structures in sight to impact spot significantly.

There's nothing obvious in dollar/yen options that supports panic here, said Simon Smollett, technical's and options strategist at Credit Agricole CIB. It all looks pretty normal and options are not leading this move in spot.

(Additional reporting by Hideyuki Sano in Tokyo)