Michael Sneyd on the USD/JPY

Source: Dukascopy Bank
© Scanpix/Reuters
We believe that the US Dollar has been oversold recently. Going forward we expect the Dollar to benefit from strong US data, particularly the Fed is currently undecided on whether or not it will be de pursuing the QE3 or any source of further easing at the end of the 2Q. We suppose that strong US data is going to have a positive effect on the US Treasury yields as well as on the US Dollar. The relationship between the US Treasuries and the US Dollar is somewhat blurred. Therefore despite the fact that the US data has been stronger, particularly at the end of the last week, the Dollar has failed to rally recently, except against the Japanese Yen. 

USD/JPY has been probably most sensitive to the US Treasury yields and this has been the driver for USD/JPY from around mid 70ies level up to above 80. From this point on we do expect this relationship will hold somewhat, therefore we think USD/JPY can move slightly towards mid 80ies range over the next quarter. However, we expect that around those levels there is still going to be a lot of demand from Japanese exporters to hedge USD/JPY exposures. Particularly in the Bank of Japan's quarterly Tankan economic outlook survey, that was recently released, there is a question which asks exporters where they think USD/JPY is going to be traded over the next year. The survey reveals that the average level is 78, which is markedly below the current cross and suggests that the exporters will be very active in hedging their activities on many upsides in USD/JPY. 

For USD/JPY our forecast for the 2Q is 85. We believe that  the main driver for the pair will be strong US data, which is going to support the US Treasury yields and USD/JPY.

Actual Topics

Subscribe to "Fundamental Analysis" feed

Subscribe
To learn more about Dukascopy Bank CFD / Forex trading platform, SWFX and other trading related information,
please call us or make callback request.
For further information regarding potential cooperation,
please call us or make callback request.
To learn more about Dukascopy Bank Binary Options / Forex trading platform, SWFX and other trading related information,
please call us or make callback request.
To learn more about Dukascopy Bank CFD / Forex trading platform, SWFX and other trading related information,
please call us or make callback request.
To learn more about Crypto Trading / CFD / Forex trading platform, SWFX and other trading related information,
please call us or make callback request.
To learn more about Business Introducer and other trading related information,
please call us or make callback request.
For further information regarding potential cooperation,
please call us or make callback request.