USD/JPY: Still trading with a very heavy undertone

There was plenty of volatility yesterday immediately after the BOJ but the inability of the pair to establish itself in the ‘cloud’ (which was above 102.30 yesterday) speaks volumes about the underlying bearish tone of this pair.

I’m still strongly of the opinion that rallies will remain capped by Japanese corporate selling and a weekly close below 100 would certainly change the market’s medium-term range outlook.

Positioning in some of the JPY crosses is still at significant levels and this will surely act as a brake on any big USD/JPY falls. Which is why I still like the long cable play; GBP/JPY shorts are the favourite speculative position in the market and if USD/JPY breaks lower, I expect cable to start catching an aggressive bid.

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