This, according to CS, allowed the pair to rally from near 100 to almost 120 in a six-week period right after Trump's election victory, before giving up nearly half those gains since early January.
On the downside, CS notes positioning still appears to be core long, leaving further room for a squeeze arguing that it is hard to argue that all possible bad news is already priced in for USDJPY.
On the upside, CS doesn't expect to sees a retest of 2015 USDJPY lows at this stage arguing that as long as the prospect for corporate tax reform and renewed reflation dynamics is not fully extinguished, there should be buyers of USDJPY emerging once speculative longs are washed out.
"As such we look for a relatively unusual phenomenon – a controlled down move in USDJPY rather than a forceful and dynamic one," CS projects.
CS now targets USD/JPY at 107 in 3-month.