TD Securities - "We feel that current USD/JPY levels are starting to look quite rich as a lot of bad (for the JPY) news—in the form of expected BoJ policy easing—has been factored into the JPY already.
(...) From a market point of view, a couple of things concern us—even if there is nothing in the price action currently to suggest that the USD rally has peaked. For one thing, the extended rally in USD/JPY is entering its 13th week of consecutive gains (ignoring amore or less unchanged week around the December holidays). The 10%-plus move over the last three months is one of the biggest moves in spot USD/JPY in recent years. (...) A persistent three month move in one direction is usually the sort of move that cries out for a correction in the developed market space.
Secondly, speculative accounts have already accumulated a big short JPY position. The latest IMM data showed a net speculative short position of 71.2k contracts. Though positioning is short of recent (late 2012) extremes (in excess of 95k contracts short), the scale of the position is still beyond the peak net short JPY positions that accumulated in 2010, 2011 and earlier in 2012.
(...) the potential for a turnaround in USD/JPY—if only from a short-term point of view—seems high to us at this point. We have been targeting a move up to 92.50/55 from a technical point of view since December’s break higher and, with the target met, we rather think that current levels represent an attractive opportunity to sell into even if there is a modest overshoot to the topside.
(...) We suggest a 3-month USD put, 89 strike (spot ref. 92.35) for 0.9%."