MUFG: Post-intervention - retail margin traders now likely USD/JPY buyers - FJElite
USD/JPY continues to stabilise at levels significantly lower than where we were prior to the intervention last Thursday and Friday. We remain around 6 big figures blow the level when intervention probably began on Thursday, having rebounded two big figures from the intra-day low on Monday. If intervention did not take place on Monday (we can’t be sure but BoJ data suggests possibly not) the impact of this intervention has been more powerful than the intervention that took place in April/May this year or indeed any of the four previous episodes in 2022 and 2024. The price action certainly highlights the favourable impact of having the US directly involved in yen buying intervention for the first time.
Looking at IMM data there is a general consensus that the FX market was short yen going into the intervention last week given the total reported short yen position amongst Asset Managers, Institutional Investors and Leveraged Funds was close to the record from 2024. Those positions being squeezed from the market could have helped reinforce the intervention. However, the positioning on the Japan retail side was not the same way round. The OTC FX margin retail positioning data for June ahead of the intervention revealed a swing from yen shorts against all currencies reported combined to yen long. The yen long position was the largest since October 2023. The primary currency pair explaining this shift on a combined basis was in fact USD/JPY. The USD/JPY short position increased in June to a record total. The implied short USD/JPY position was USD 17.65bn which as can be seen historically is an extreme position and by some distance a record. The position is larger than the probable total size of the intervention undertaken last week.
