A look at the banks in USDJPY trades

It's green all the way on the ledgers of the banks books of those trading USDJPY

  • Morgan Stanley Long at 121.43 TP 127 SL 121.50
  • NAB +@119.00 TP 126.80 SL 121.75
  • BOFAML +@119.71 TP 124.59 SL 121.35
  • JPM +@113.99 TP 128.00 SL 120.35

Morgan Stanley's trade is interesting as part of their reasoning was that US yields would be rising. Yields have continued falling since they put the trade on. That goes to show that not all your ducks have to line up to get a profitable result. The latest FX report from Morgan's details their thinking further;

"For USDJPY to continue rising, it is fine for 10 year yields to fall as long as 2y yields rise by more (a bear flattening). Higher front end yields encourage Japanese investors to reduce hedge ratios on their US fixed income positions, lifting USDJPY. But if disinflationary concerns grow to the extent that Fed liftoff is delayed further, USDJPY will be particularly vulnerable, in our view. USDJPY's performance hinges crucially on US data as we don't expect further easing from the BoJ. We hold the trade for now given that we think the US economy will be able to beat modest expectations, but have tightened our stop to protect profits."

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