USD/JPY: 118/120 is a very tough cap for near term - Westpac

Robert Rennie, Research Analyst at Westpac, suggests that they have run with a passive ‘buy on dips’ bias for much of the last quarter without success and now is not the time to step up.

Key Quotes

“We see 118/120 as a very tough cap for USD/JPY near term, and with a market that remains very short the ¥, risks of correction back towards 110/112 look reasonably high.”

“This would be a huge buying opportunity for us. An eventual break higher in US yields as the Fed tightens more aggressively in the second half of 2017 will drive the US$ higher.”

“Bottom line, wait for the position based correction end Q1 as an opportunity to buy for the second half of the year.”