USD/JPY: Getting the Markets Confused - SocGen
Kit Juckes, Research Analyst at Societe Generale, suggests that on the
first of February, just before the BOJ’s bungled attempt to ease
monetary policy, the Bloomberg consensus for USD/JPY in Q4 2016 was 125,
with a range of 110-134.
Key Quotes
“Today,
the consensus is 118, the range 100-131. That is about as confused as
the FX market ever gets. The CFTC speculative positioning data is less
confused – yen longs are above 50,000 contracts, something that happens
rarely. This happened in late 2003/early 2004, as USD/JPY broke below
100; In early 2008 as USD/JPY broke briefly below 100; in late 2009 as
USD/JPY broke through 90 and a couple of times at the end of 2011 when
USD/JPY was at its lows in the 70s.
The current spike in
positioning represents both a huge capitulation of the bearish yen
consensus, and disillusion with the stronger dollar theme as US rate
expectations tumble and equity indices fail to benefit from easier
policy globally.
When I look at the positioning history, I draw
two simple conclusions. Firstly, yen trends don’t turn around suddenly
just because the CFTC data point to a market that’s very long – it was 7
months after the peak in yen longs in early 2004 before a 3-year
USD/JPY rally from 102-124 got underway. Secondly, these spikes in
positioning do seem to me to point to a turn in the tide. Which I think
is coming.
I don’t hold out much hope of a successful BOJ action
to fight the market because policy-makers are still bruised after
making a mess of their move in February. But I do think that quieter
markets, the steady-as-she-goes economic recovery in the US and the
under-performance of the Nikkei can all help get USD/JPY back up to 120
in the next few months.”
(Market News Provided by FXstreet)
