Westpac says:
- USD/JPY – just not happening: Back on 8th April we argued that the prospects of a BoJ policy shift into Q3 would support gains in USD/JPY. However, a number of more recent events have compromised that view.
Back on 8th April we argued that the prospects of a BoJ policy shift into Q3 would support gains in USD/JPY. However, a number of more recent events have compromised that view
1. Kuroda is currently ‘talking down’ the chances of further monetary policy developments in the near term.
2. The situation in Ukraine has taken a very clear turn for the worse and could easily deteriorate further. The conflict could easily extend through into parts of neighbouring Moldova.
3. Strong US data has simply failed to lift US yields and the US$.
On April 8th, we recommended buying USD/JPY on dips (102.40, 101.80 and 101.20). However, arguments for being long USD/JPY right now are running very thin. We would thus recommend closing that long position at the current 102.10 level.
We still feel that domestic data will continue to fall short of BoJ forecasts and that this cannot simply be blamed on offshore developments. However, being short the yen right now makes little sense to us. We would wait for a deeper correction and clearer signs of softer Japanese data before considering selling the yen again.
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It’s a holiday in Japan today, so liquidity is thinned somewhat. USD/JPY has fallen through 102.00 in the past 20 minutes and sits around 101.90 as of writing.