The Yen’s charging – Societe Generale
|The unwinding of short Japanese Yen (JPY) positions continues apace, Societe Generale FX strategist Kit Juckes notes.
A further fall in USD/JPY is unlikely to be sustainable
“In the three weeks since it peaked, it has gained 6% against the USD, 8% against the AUD, 9% against the MXN and BRL, and 11% against the NOK. Were there huge, long NOK/JPY trades on out there that I didn’t know about? Sales of Yen calls, to finance purchases of puts, was a trade that benefited from (and helped drive) a low volatility, slow rise in USD/JPY.”
“Those trades can’t survive a spike in volatility, let alone am appraisal of the trade’s future as Fed easing comes closer, the US yield curve disinverts rapidly and BoJ rate hikes come into sight. So far, the momentum of the move (at least as measured by RSIs) is similar to that in late 2022 and late 2023.”
“To that extent, a further fall in USD/JPY at the current speed is unlikely to be sustainable. A slower move lower, on the other hand, would confirm that this really is more than just a ‘clear the air’ flush of speculative positions.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.