USD/JPY neutral bias in the short term – Westpac

By FXStreet FXStreet (Edinburgh) – Strategists at Westpac have suggested the pair should stick to its neutral outlook in the near term.

Key Quotes

“Signals are mixed across short and medium term. Momentum suggest we may have seen the low in USD/JPY for now and support around 115.80/20 should take some work to get through. Topside layers of resistance around 118.60/10 keeps us neutral”.

“We finished last year on a neutral stance for USD/JPY on the basis that the market had thrown in the towel on fresh BoJ stimulus any time soon and post Fed position unwind”.

“However, the speed of USD/JPY’s fall so far this year looks overdone. Sure, recent events in China imply a heightened risk aversion but our risk index is already showing signs of peaking at around +3 standard deviations, an extreme level that suggests much of the ‘bad news’ is already in the price”.

“With our JPY NEER model at highs back to Oct 2014 and crude prices slumping the arguments for soothing words from the MoF/ BoJ are certainly rising. Thus we shift back to a buy bias, though dips below 116.00/50 would see us ‘stopped out’.
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Source:: FX Street