Brian Mangwiro, Strategist at RBS, maintains a neutral outlook on USD/JPY and a short bias on EUR/JPY.
“After surging 25.7k last week, the speculative short position fell 7.6k last week to -23.6k. Compared to pre-QQE highs (-110k), current JPY positioning is arguably neutral and consistent with the view that ongoing BOJ QQE is potentially fully priced.”
“Gov. Kuroda continues to state that further policy loosening is not on the cards at this juncture, and that’s likely to weigh on speculative short positioning. His view seems predicated on oil prices holding or grinding higher, and favourable energy-base effects boosting CPI prints into Q4’15. We note that 5y5y JPY CPI continues to rally (currently at 1.38% and up 35bp so far this month). That should give BoJ additional comfort.”
“Strategy: We are neutral on USD/JPY; trading ranges are tight and it’s still a technical trade. EUR/JPY has continued to grind higher in line with the squeeze (higher) on EUR/USD. Our bias is to be short. Current level is 136.36, the next key resistance comes in at the 200d ma (137.30), which is also a 50% Fibonacci retracement level (137.95).”