Prcbroker's exclusive financial report highlights guide:
At present, the yen financing trading environment is rapidly improving, and the USDJPY is likely to climb to the 152 yen level at one point.
In the medium term, we will still maintain the tone of "the dollar is slowly depreciating and the yen is strengthening", and rationally observe the background of the rise of the dollar and the yen.
In the Prestia Insight report released on February 19, we mentioned the impact of the new Small Non-Taxation System (NISA) on the depreciation of the yen, which is a factor in the depreciation of the yen. This time, we want to confirm the movement of the market, which is mostly dominated by speculation. Overall, we believe that the current JPY financing trading environment is rapidly improving, and USDJPY is likely to face some upside risks in the near term.
According to the U.S. Commodity Exchange Commission (CFTC), with reference to data from the non-commercial sector, the net short position in the yen has increased to about 12 recently (as of February 20).00,000 lots, close to the record of about 13 in November last year00,000 lots at all-time high (151..)94 yen). The latter is also the highest level since 2014, which means that the speculative yen short margin is basically close to the limit.
On the other hand, due to the sharp improvement in the trading environment for yen financing, the short position of speculators in the yen is likely to further expand in the short term. Typically, three conditions need to be met to enter into a JPY financing transaction: (1) a high level of interest rate spreads, (2) an expected decrease in volatility, and (3) an increase in investor risk tolerance. In terms of (1), given the future situation in Japan and the United States, the current market expectation of an early interest rate cut has weakened due to the strong economy of the United States. And in Japan, due to the speech of Vice President of the Bank of Japan Uchida on February 8, the possibility of consecutive interest rate hikes after the lifting of the negative interest rate policy was canceled. In other words, the high level of interest rate differentials between Japan and the United States is likely to be maintained for a longer period of time than expected at the beginning of the year. (2) On the one hand, based on the one-month volatility of the options market, the volatility of the USDJPY is in a downward trend. This month, the USDJPY fell to 7 at one pointAround 1, close to the lowest point reached in November last year (69 units). In addition, the Australian dollar and the Japanese yen fell to 6 at one pointAround 9, reaching the lowest level since June 2021, the cross-pegging is also quite noticeable. (3) In terms of stock price indices in major countries, including Japan, they continue to hit record highs. Investor psychology is improving.
For USDJPY** in the medium term, we maintain the tone of "slow depreciation of the US dollar and strengthening of the yen". This is because in terms of Japan-US monetary policy, we believe that the basic direction will not change, that is, the US will implement interest rate cuts, while Japan will implement rate hikes. In the short term, if USDJPY rises to around 152, the Japanese authorities may remain wary of intervening and the pressure from above may still persist. However, in the forex market, it is not uncommon for brief overreactions to occur. If the JPY financing deal is further favored, in addition to the implementation of actual intervention, it is necessary to calmly observe whether the rise of the US dollar and the yen will temporarily stall or whether it will enter a sustained upward trend.
1: Please refer to Prestia Insight 202402.19 "USD JPY: Whether the new NISA is the key to the upside"。