Home USD/JPY: 4 Factors Supporting USD/JPY Amid NKY weakness? What’s Next? – BofAML
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USD/JPY: 4 Factors Supporting USD/JPY Amid NKY weakness? What’s Next? – BofAML

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.

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Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.