Buying NZD/JPY in order to profit on forthcoming Yen weakness say Citi.
Recent CFTC data showed market positioning turned net short the Yen for the first time since December 2015.
This seems to indicate a market turning bearish on the currency.
Above: Futures traders turn net short the Yen
For Citibank the pair of choice to trade yen weakness with appears to be NZD/JPY.
The wide rate differential between the New Zealand Dollar and the Yen – at more than 1.85% is probably the driving motive behind the recommendation, as well as the Bank of Japan’s efforts to target yields on 10-year benchmark bonds.
The Yen is expected to suffer the more optimistic the Fed are at their rate meeting on Wednesday.
Citi is advocating going long at 82.30, with a target at 83.85 and a stop loss at 81.38.
Another unusual long to take advantage of JPY weakness is Soc Gen’s suggestion of buying NOK/JPY as oil price expectations rise following the OPEC deal.
However, according to commodity experts at BOFAML oil traders need be wary of an over hawkish Fed, as that will depress commodity prices.