25 Mar 2016
How long and wrong is Yen positioning? – Deutsche Bank
Alan Ruskin, Macro strategist at Deutsche Bank, suggests that there is an active debate on the current state of JPY positioning as the IMM net non-commercial positioning showed some minor trimming of long yen exposure as of Tuesday March15th, but the JPY longs were still near historical highs.
Key Quotes
“Against this and suggestive of much more restrained long yen positions since the last, possibly dated CFTC snapshot is:
i) The risk reversals (3m riskies) and butterflies (10 delta with sign reversed ), are more consistent with near flat CFTC non-commercial positioning. By the end of Feb, downside USD/JPY strikes were becoming less fashionable, and upside strikes were offering good value, especially once risk appetite variables had turned.
ii) Our CORAX positioning that provides an update through March 22nd had flipped to close to neutral. In addition, relative to long-term trends, leveraged and corporate flow was flattish, leaving real money long JPY.
USD/JPY won’t run away on the downside in part because the technical levels that were resistance in the USD bull run are now acting as downside brakes. An example is the Y110 level that is now key support.
Nonetheless, the conclusions from the above still favor selling USD/JPY upticks more than buying downticks, especially if CFTC data confirms JPY longs have been at least moderately trimmed.”
Key Quotes
“Against this and suggestive of much more restrained long yen positions since the last, possibly dated CFTC snapshot is:
i) The risk reversals (3m riskies) and butterflies (10 delta with sign reversed ), are more consistent with near flat CFTC non-commercial positioning. By the end of Feb, downside USD/JPY strikes were becoming less fashionable, and upside strikes were offering good value, especially once risk appetite variables had turned.
ii) Our CORAX positioning that provides an update through March 22nd had flipped to close to neutral. In addition, relative to long-term trends, leveraged and corporate flow was flattish, leaving real money long JPY.
USD/JPY won’t run away on the downside in part because the technical levels that were resistance in the USD bull run are now acting as downside brakes. An example is the Y110 level that is now key support.
Nonetheless, the conclusions from the above still favor selling USD/JPY upticks more than buying downticks, especially if CFTC data confirms JPY longs have been at least moderately trimmed.”