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Institutional Insights: Goldman Sachs On USDJPY
According to Golman Sachs the 'significant move in USDJPY market and all the eyes are on “JPY carry trade”. Here’s some thoughts of positioning.
•Positioning Score: Our FX team’s Positioning Score indicates that JPY short has been mostly washed out, and now slightly long. This would be a sign that market is close to bottoming out. [Figure 1]
•Retails: the latest data as of July 23rd indicate that there was historical high of JPY short position with leverage (~$5bn). We believe those positions accelerated USDJPY drop involving margin calls. Our FX sales desk believes 60-80% positions have been swept by the market move. [Figure2]
• Lifers: We remain our view that no repatriation type of flows from JP lifers, as it is difficult for them to tactically increase hedge ratio.
• Dealers: their short gamma position from lifers’ put purchase would be another factor of USDJPY drop, especially around 142-147. [Figure 3]
• Pensions: as of today’s market, we estimate ~$12bn of USDJPY purchase will be required for rebalancing, which would further mitigate the down trend of USDJPY'
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!