USD/JPY Violently Reverses from YTD Low with Biggest Gain in 8-Months

Key Takeaways:

  • USD/JPY technical strategy: pierce of 12-month trendline brought out the buyers
  • USD/JPY traded to 107.32 on Friday, as high as 109.40 on Monday
  • CFTC data showed hedge funds continued to hold JPY short position
  • IGCS Highlight: Drop in net-long exposure favors contrarian via of upside

Hedge funds are likely patting themselves on the back, for now. Data from the CFTC showed they added to short JPY positions last week, which, if held, definitely played out well on Monday. Multiple risk-off scenarios that were feared last week going into the weekend failed to play out. As a result, the JPY sold off, and USD/JPY rose by the most in 8 months as the US Dollar rebounded.

The real action in JPY shorts may be seen in CAD/JPY or GBP/JPY, which traded to the highest level since November 2015 and 1-month highs respectively. USD/JPY pushed above 109, but recently traded on Friday to the lowest level of 2017 at 107.32. Validating the push higher in JPY was the SPX closing at a record high.

The technical picture seems to favor a continued bounce as a failed breakout, meaning the move to new 2017

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