Dollar/yen has moved on the ebb and flow of the political news from Washington. Things have been quite volatile, to say the least. What’s next?
Here is their view, courtesy of eFXnews:
Credit Agricole CIB FX Strategy Research notes that the rising uncertainty about the Trump Administration is triggering risk-off moves in the markets.
In that regard, CACIB expects that over the coming days price action is likely to remain driven by political headlines especially in the absence of significant economic data.
“Thus while a further decline in USD/JPY towards the April lows remains possible further significant weakness would require the US rates curve to completely price out Fed tightening or even move to a possibility of policy easing,” CACIB argues.
In relation to that, CACIB suspects that equity markets will also drive USD/JPY price-action over the coming days.
“The current correction is still modest relative to the rally in since the elections and it would probably take a further 5%-10% fall in equities to trigger a significant tightening in the financial conditions, derailing risk sentiment and the Fed,” CACIB adds.
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