Citi: Tide change for JPY?

Citi Bank’s JPY spot desks are anticipating a reversal of the recent JPY rise with technical indicators in cross pairs like EUR/JPY, CHF/JPY and AUD/JPY suggesting that interim bottoms are in place.

They favour playing this view via USD/JPY 2m 135/138 call spread. This view is in line with their fundamental view that the market is underpricing the Fed’s policy path allied to decent long term technical support near 130.50 and the fact that the market positioning of JPY has swung so significantly in recent weeks.