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The week ends with some modest consolidation in the USD but it’s only a distraction to a solid start of the year. Analysts at TD Securities see the USD/JPY rally running out of steam. 

Key quotes

“Our year-end view rested on the fact that a weak USD narrative would require a positive shift to the non-US growth story in H1 and the emergence of a risk premium in H2, which would drive it lower given frothy slower-moving valuations.” 

“For now, risk markets should remain on edge into Super Tuesday, as markets start to grapple with the Bern factor.”

“The USD should remain upbeat but looks vulnerable over the next two weeks on month-end and US political risks. Still, that’s just another reason to fade the rally in USD/JPY.”