USD/JPY posted sharp losses in the month of September. What is the outlook for the pair going into year-end?
Here is their view, courtesy of eFXdata:
CIBC Research adopts a bearish bias on USD/JPY going into year-end. CIBC targets the pair at 103 into year-end and 101 in Q1 of 2021.
“With monetary policy on auto-pilot, we expect limited upside pressure on domestic yields. Therefore, if we are to see additional JGB-UST spread compression, key to additional USDJPY downside, it may have to come from the US side of the equation. However, the perpetuation of limited yield pick-up is likely to see Japanese domestic investor flows remain well below year-ago levels amidst potential US election-related political uncertainty,” CIBC notes.
“Limited yield pick and risk uncertainty point towards ongoing JPY impetus. The BoJ/MoF may only start to become uncomfortable should JPY gains begin to threaten 101.19 year-to-date lows prior to year-end,” CIBC adds.
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