USD/JPY: Downside risk still prevails – Deutsche Bank
By FXStreet Taisuke Tanaka, Strategist at Deutsche Bank, suggests that the USD/JPY is hovering at around ¥112-113, but downside risk remains prevalent.
Key Quotes
“Japanese public pensions and some investors should continue to buy dollars on weakness, but we do not envision strong enough purchasing to boost the USD/JPY rate.
At the same time, the dollar faces strong selling pressure at ¥114-117 due to hedging by Japanese exporters and institutional investors. The USD/JPY has held at this resistance line even with the easing in risk-off sentiment thanks to solid US economic data and the rebound in equity and commodity markets.
The USD/JPY tends to fall in disappointment at this upper limit even when positive news appears, while falling directly with any bad news. The rate dropped sharply last week after FOMC members scaled back their forecast this year from four rate hikes to two, even though the markets had already discounted just a single hike.
The good news for Japan is that any rush to sell the USD has been limited due to the retreat in risk-off sentiment, and the bottom has held firm at ¥110-112. Indeed, the fundamentals do not offer any reason for excess pessimism. Still, we can hardly be optimistic …read more
Source:: FX Street
