Retail positioning in USDJPY continues to make new peaks with every day that passes, an all time peak of 87.18% of retail traders being LONG the pair has been reached today. Its a painful thing to see but as contrarians we maintain a short bias for intraday trading positions.

USDJPY is forming a squeeze formation over the last week or so, which is much like a spring being coiled for a break out. There are 2 fundamentally driven scenarios for this breakout:

1. If global uncertainty remains heightened, Yen buying is likely to continue and we are likely to see a trend following move even lower (more pain for retail traders)

2. A real and lasting agreement is formulated in the Euro zone could result in a break higher and Yen weakening

3. BOJ Intervention could result in strong weakening of the Yen.

As we have seen from past BOJ interventions this is often results in a short term spike and then the usual USDJPY shorting resumes. The underbelly of this flight to the haven of the Yen is the global economic situation, without a cure for the worlds ills the 87.18% of retail traders long this pair will continue to feel the pain.