Societe Generale FX Strategy Research notes that the last year can be divided into two ranges for USD/JPY and US 10-year treasuries:
“Pre-Trump, USD/JPY traded in a 98-108 range and 10s in a 1.31.8% range. Since mid-November, USD/JPY has traded in a 108-119 range, 10s in a 2.15-2.70 range. We are at the bottom of that range, in both FX and bond markets.
From here, SocGen prefers to be short yen than short Treasuries.
"Now that we’ve see a sizeable long position build-up in CFTC data, We’re more inclined to view this latest move as the last hurrah of the bond bulls, and fade it by staying long EUR/JPY and going long USD/JPY,” SocGen advises.
USD/JPY is trading circa 109.35 as of writing.
Source: Societe Generale Cross Asset Research
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