Forex Flash: JPY Position Squaring Ahead of the BOJ - Nomura

FXstreet.com (Barcelona) - Nomura strategists note that the notable spec position changes were selling of EUR and buying of JPY, the latter of which was likely position squaring ahead of the important BOJ meeting later in the week.

Further, they add that overall, positioning remained short in both these currencies (coincidentally $10.5bn short in JPY and EUR), with the EUR short being the largest since November and option skew confirming this bias. Their real time indicator shows a slight reversal of the w-o-w futures positioning changes, with some EUR buying and JPY selling. Overall they add that USD positioning became more long as well, despite less than convincing economic data and price action.

In summary, they see that JPY net shorts appeared to have covered to some degree (by $1.4bn in the week), which was reflected in price action as well ahead of the BOJ meeting as the USD/JPY trended somewhat lower under 93. EUR shorts were added to in reasonable size by non-commercial investors ($2.6bn w-o-w), which was consistent with the grinding move lower during the week (ending Tuesday), though price action later on Thursday and Friday was less supportive. While positions are short, they note that we are still way off mid-2012 levels and do not think a violent washout is likely. Finally, they see that long positioning in the USD increased (to $23.4bn). They write, “Though we are inclined to wait on the sidelines during Q2 for the dollar bullish momentum to reassert itself once the budget cuts related data weakness is out of the way.”