Yen Sentiment Shifted by Heavy Turnover, Potential BoJ Tightening

Societe Generale strategists are highlighting a potential shift in sentiment for the Japanese Yen. They point to heavy turnover in USD/JPY, which has dropped below its 200-day moving average. Leveraged accounts were forced to cover shorts as the pair slid.

The strategists argue that potential Bank of Japan tightening and bond repatriation flows ahead of fiscal year-end support a more constructive Japanese Yen outlook. However, conviction hinges on Federal Reserve policy and rate spread dynamics.

An estimated $30 billion was traded yesterday in USD/JPY from above the 100-day moving average to below the 200-day moving average. This led to follow-through selling in Asia overnight, adding more daylight below the psychological threshold.