USD/JPY Outlook Shifts as Yen Shorts Are Cleansed and Focus Turns to US Inflation
The USD/JPY currency pair has seen a significant shift in positioning risk as yen shorts have been cleansed by around 40% following intervention episodes.
According to CFTC data, leveraged funds cut their net short yen position from 101,990 contracts the week before to 60,825, suggesting that the market is no longer as lopsided or vulnerable to another sharp squeeze.
The focus now shifts to upcoming US inflation data, which could have a significant impact on expectations for Fed rate hikes and USD/JPY prices. A hot print could revive expectations of further rate hikes, supporting the currency pair.
Technically, price signals are pointing bullish, with dips still being bought aggressively despite bearish RSI (14) and MACD indicators. The weekly chart also suggests a potential upside directional risk, with the first level to watch at 158.58, which corresponds roughly with the 38.2% Fibonacci retracement of the July-August unwind.