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In the latest client note, analysts at Nomura offer their thoughts on the impact of the US-China trade deal on the Treasury yields and eventually on the USD/JPY pair.

Key Quotes:

“Market appears to have fully incorporated a potential Sino-US trade agreement and a subsequent recovery of the US and Chinese business climate.

Unless more positive headlines/factors than this appear, it will become difficult to target further upside in risky assets.

Unlike risky assets, 10-year UST yields seem to be determined to some extent by the Fed’s dovish stance “¦

CTA long positions in USD/JPY have gradually levelled off, and systematic trend followers have become careful to follow the upward trend of the pair at the moment. In the case of those targeting a short-term reversal on Japanese export oriented and cyclical sectors, one should consider that USD/JPY will likely run of steam and miss ~113.6 “¦ as further upside of long-term UST yields remains subdued.”