First there was "long social-media", then "short bonds", and now - as Credit Suisse notes - the next "pain trade" appears to be building in USDJPY (which is very worrisome for broad risk assets in general).
Credit Suisse - The next "pain trade" ?
As we have highlighted on several occasions, one of the reasons we have been looking for lower US yields (besides a yield top for 5yr5yr US and rising US Duration Risk Appetite) has been positioning and the "pain trade", and we believe we may well have the same conditions in USDJPY.
Here, the market continues to weigh heavily on a cluster of pivotal supports at 101.23/100.75 – the repeated series of lows for the year from February, March and April, the rising 200-day average and the 38.2% retracement of the June-13/January-14 uptrend. A break below here, which we think increasingly likely, would see a top, warning of a potentially aggressive move lower.
Below 100.75 (and probably now 101.20) would see a top confirmed to target 99.63 initially, ahead of the 61.8% retracement of the rally from last June at 98.25. While we would look for this latter level to hold at first, a break in due course can target 96.57, and eventually 94.65 – the 38.2% retracement of the entire rally from September 2012.