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16 Dec 2014
JPY pain trade – TDS
FXStreet (Barcelona) - Shaun Osborne and Martin Schwerdtfeger, FX Strategists at TD Securities, note that the speculators will be forced to cover their net adding activity in JPY shorts last week as JPY sees a sharp fall in spot rates due to USD/JPY trading below 117 levels.
Key Quotes
“Wobbly stocks, weaker HY credit, high anxiety in EM FX, and continued pressure on commodities will make for a bumpy run into the end of the year. But, as the Fed readies for a change in messaging that we expect to flag a readiness to think about raising rates, this is perhaps no real surprise.”
“Risky assets did well under the Fed QE-on regime and have struggled a little more obviously as the Fed liquidity spigot was slowly turned off in the past few months.”
“Tighter global USD liquidity will be broadly USD-supportive going forward but the short-term impact of further risk aversion has been more pronounced JPY strength this morning.”
“MM data last Friday revealed that spec investors continued to carry a significant JPY short position that had seen some significant net adding activity just in the last few weeks. Little wonder then that the flush out in USDJPY through the low 117s overnight has already caused a sharp fall in spot—which may well extend as JPY shorts are forced to cover.”
“Price action in USDJPY (and CADJPY) is technically bearish and points to the potential for this correction to extend quite significantly, possibly to the 113/113.50 area in the next couple of weeks.“
Key Quotes
“Wobbly stocks, weaker HY credit, high anxiety in EM FX, and continued pressure on commodities will make for a bumpy run into the end of the year. But, as the Fed readies for a change in messaging that we expect to flag a readiness to think about raising rates, this is perhaps no real surprise.”
“Risky assets did well under the Fed QE-on regime and have struggled a little more obviously as the Fed liquidity spigot was slowly turned off in the past few months.”
“Tighter global USD liquidity will be broadly USD-supportive going forward but the short-term impact of further risk aversion has been more pronounced JPY strength this morning.”
“MM data last Friday revealed that spec investors continued to carry a significant JPY short position that had seen some significant net adding activity just in the last few weeks. Little wonder then that the flush out in USDJPY through the low 117s overnight has already caused a sharp fall in spot—which may well extend as JPY shorts are forced to cover.”
“Price action in USDJPY (and CADJPY) is technically bearish and points to the potential for this correction to extend quite significantly, possibly to the 113/113.50 area in the next couple of weeks.“