The run-up in USD/JPY, above its 55-day (Y77.40) for the first time since Dec 30, is not a complete surprise. CFTC data, as per Friday, for positions as of Jan 17, showed that speculative accounts had a net yen long of +58,862 contracts, vs the prior week’s net long of +59,657 contracts, which was the largest JPY long since March 25, 2008 (record JPY long of +65,920 contracts). This was the third consecutive week of +50k contract size readings. Recent CFTC data history shows that net JPY longs rarely stay over +50k contracts for more than a week or two. The exception was Spring 2008, when there were net yen longs over +50k contracts for 4 weeks before positions were trimmed. In terms of sentiment, BoA/Merrill Lynch’s January fund managers’ survey showed that a net 66% of managers viewed the yen as overvalued (highest since Sept 2011) vs 61% in December.
EasyForexNews Research Team