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Robert Rennie, Research Analyst at Westpac, suggests that they have been more cautious about further gains in USD/JPY in recent weeks on the basis that we have come a long way from sub 105 in a short period of time.

Key Quotes

“Above 110.88, the pair had retraced more than 61.8% of the November/ March down-move. On top of this, the ¥ has become fundamentally cheap of a NEER/REER basis. Thus we have tended to argue that much above 112/114 was unlikely.”

“To be sure, the on/ off nature of trade negotiations/ NK summit plus EM stress warrant increased caution in the near term. Mrs Watanabe appears to have built up some decent long TRL positions according to TFE data too and demand for foreign yield has certainly picked up in recent weeks as well.”

“Thus we stick with a neutral near term outlook for another week.”