15 Jun 2015
USD/JPY: Upside limited - JPM
FXStreet (Guatemala) - Besides politics, improving JPY fundamentals also suggest that the potential upside in USD/JPY is limited.
Key Quotes:
"Looking through monthly volatility, the trend in Japan’s current account surplus is increasing, driven by an improvement in the trade balance, which is mainly due to lower oil prices."
"Meanwhile, Japanese foreign securities investments have lost momentum. As a result, on net, JPY’s demand/supply balance from the balance of payments has improved significantly."
"Since Abenomics started at end-2012, USD/JPY has rallied on four separate occasions: 1) November 2012 to May 2013, 2) October 2013 to December 2013, 3) August 2014 to September 2014 and 4) October 2014 to December 2014. However, 1) and 4) were ignited by surprising BoJ policy actions.
"Therefore, given the current situation, the experience in 2) and 3) should be seen as better guides. Note that, USD/JPY rallied by 9.2% and 8.5% respectively over these two periods. If USD/JPY rallies to a similar extent in the currency phase, the pair could reach around 130."
Key Quotes:
"Looking through monthly volatility, the trend in Japan’s current account surplus is increasing, driven by an improvement in the trade balance, which is mainly due to lower oil prices."
"Meanwhile, Japanese foreign securities investments have lost momentum. As a result, on net, JPY’s demand/supply balance from the balance of payments has improved significantly."
"Since Abenomics started at end-2012, USD/JPY has rallied on four separate occasions: 1) November 2012 to May 2013, 2) October 2013 to December 2013, 3) August 2014 to September 2014 and 4) October 2014 to December 2014. However, 1) and 4) were ignited by surprising BoJ policy actions.
"Therefore, given the current situation, the experience in 2) and 3) should be seen as better guides. Note that, USD/JPY rallied by 9.2% and 8.5% respectively over these two periods. If USD/JPY rallies to a similar extent in the currency phase, the pair could reach around 130."