Citi discusses USD/JPY outlook and sees a scope for further positioning-adjustment ahead after this week's BoJ and ahead of the lunar new year holiday in Asia.
"JPY bucks the trend of G10, down 0.66% on the day. CitiFX Wire’s Stephen Spratt says the post BoJ position cleanse appears to still be on the way. JGB futures have squeezed higher and now sitting 7bps richer on the day. We watch for CTA buying demand to emerge if the move continues (~147.44). BoJ repo takedowns remain near records, futures OI is at fresh highs sine 2007, and the 3rd largest foreign selling ever last week all suggest a large shorts bases remains," Citi notes.
"JGB rally helping a mechanical shift higher in USDJPY (+0.5%), which our spot desks suspects is helped by pare down of popular shorts ahead of the Asia holiday period," Citi adds.