Kit Juckes, Research Analyst at Societe Generale, suggests that on the first of February, just before the BOJ’s bungled attempt to ease monetary policy, the Bloomberg consensus for USD/JPY in Q4 2016 was 125, with a range of 110-134. Key Quotes “Today, the consensus is 118, the range 100-131. That is about as confused as the FX market ever gets. The CFTC speculative positioning data is less confused – yen longs are above 50,000 contracts, something that happens rarely. This happened in late 2003/early 2004, as USD/JPY broke below 100; In early 2008 as USD/JPY broke briefly below 100; in late 2009 as USD/JPY broke through 90 and a couple of times at the end of 2011 when USD/JPY was at its lows in the 70s. The current spike in positioning represents both a huge capitulation of the bearish yen consensus, and disillusion with the stronger dollar theme as US rate expectations tumble and equity indices fail to benefit from easier policy globally. When I look at the positioning history, I draw two simple conclusions. Firstly, yen trends don’t turn around suddenly just because the CFTC data point to a market that’s very long – it was 7 months after the peak in yen longs in early 2004 before a 3-year USD/JPY rally from 102-124 got underway. Secondly, these spikes in positioning do seem to me to point to a turn in the tide. Which I think is coming. I don’t hold out much hope of a successful BOJ action to fight the market because policy-makers are still bruised after making a mess of their move in February. But I do think that quieter markets, the steady-as-she-goes economic recovery in the US and the under-performance of the Nikkei can all help get USD/JPY back up to 120 in the next few months.” For more information, read our latest forex news.