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Nov 26 - 09:55 AM

USD/JPY: COVID Triggers FX Vol Spike; A Close Below 114.35 Will Be The Largest 1-Day Decline In 2021 - MUFG

By eFXdata  —  Nov 26 - 08:30 AM

MUFG Research discusses the JPY outlook in light of today's big decline on the back of the building concerns over the new COVID variant.

"The reports of a new COVID strain that could be much more transmissible and possibly more lethal is driving FX moves this morning – this is the first morning we can remember in quite some time when COVID has had such a clear impact across all markets. What is notable in FX today is the outperformance of the Japanese yen," MUFG notes. 

"Our z-score measure of positioning for JPY amongst Leveraged Funds shows the most stretched short position since 2015. That was when USD/JPY was trading above 125.00 and was just ahead of the notable drop in 2016. On a closing basis, if USD/JPY closes below 114.35, it will be the largest one day decline so far in 2021 and could well stir investors who likely remain substantially short JPY," MUFG adds. 

MUFG Research/Market Commentary


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