Search ForexCrunch

Dollar/yen  has been quite stable above 110 and is looking for a new direction. What’s next?

Here is their view, courtesy of eFXdata:

Bank of America Merrill Lynch discusses USD/JPY outlook and notes that  USD/JPY has remained relatively resilient as of late despite NKY weakness.

“While the Nikkei 225 index has corrected more than 5% since President Trump officially approved tariffs on Chinese goods on 14 June, USD/JPY has been largely unchanged.  This divergence may continue if trade tensions rise only gradually, until the market starts pricing in slower US growth and/or Fed hiking path. This may take a while judging from the run of strong US data,” BofAML notes.

“USD/JPYs  recent  resilience  has  both macro and flow aspects, in our view:  (1)  USD/JPYs diminished sensitivity to risk assets and sustained sensitivity to the Feds policy;  (2)  M&Aactivity  by Japanese  corporates;  (3)  net  equity flows pointing to yen selling; and  (4)  lack  of  short  JPY  positions  among foreign fast money,” BofAML argues.

In line with this view,  BofAML  expects USD/JPY to rise to 116 by 3Q18 before peaking  but acknowledging that unpredictable trade war scenarios will likely drive the currency into the summer. BofAML expects USD/JPY to end year at 112.

For lots  more FX trades from major banks, sign up to eFXplus

By signing up to eFXplus via the link above, you are directly supporting  Forex Crunch.