JPMorgan warns that a drop in USD/JPY below 155 could trigger $102.6 billion in short covering.

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JPMorgan warns that a USD/JPY drop below 155 could trigger $102.6 billion in yen short covering, pushing the pair toward 142–146. Traders should monitor key support and resistance levels, as unwinding positions may fuel further declines. The yen has strengthened due to expectations of a BoJ rate hike and increased hedging demand. While some view crypto as a long-term value investment, JPMorgan notes that the 155–165 range remains a critical barrier.

BlockBeats report, on September 4, as the yen staged a strong rebound nearing the 155 level, JPMorgan warned that if USD/JPY falls below 155, approximately JPY 16 to 17 trillion, equivalent to about USD 102.6 billion, in outstanding yen short positions could be forcibly closed, further driving the yen higher and potentially pushing USD/JPY down to the 142–146 range.


JPMorgan strategists, including Junya Tase, indicated that recent price movements suggest that large-scale yen short positions may not yet be fully unwound. Should the USD/JPY fall below 155, the risk of "selling begetting more selling" will rise, potentially leading to a yen appreciation that exceeds market expectations.


This week, the USD/JPY pair briefly touched 160.39 before quickly retracing to around 155.30. The yen is on track to gain approximately 2.7% against the dollar this week, marking its best performance since July.


The yen's strength has been driven by multiple factors, including rising market expectations of further Bank of Japan rate hikes, unwinding of speculative short positions, and increased demand for currency hedging by domestic Japanese investors. The swap market currently fully prices in a 25-basis-point rate hike by the Bank of Japan this month and assigns an approximately 80% probability of another hike in December.


However, JPMorgan believes that market expectations regarding the Bank of Japan and GPIF adjusting their asset allocations may be overestimated, and does not consider a significant break below the 155-165 range for USD/JPY to be likely.


Meanwhile, Japan’s top currency official, Jun Mimura, expressed dissatisfaction with the current yen movement and stated that Japan is prepared to continue responding to forex market volatility, further heightening market concern over the risk of official intervention.


In dollar terms, Bank of America currently favors a short position on USD/JPY with a target of 149; TD Securities maintains a mildly bearish view on the dollar for the remainder of the year. The market is awaiting the U.S. non-farm payrolls data and the upcoming CPI report next week to gauge the Fed’s future policy path.

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