USD/JPY upside likely to remain capped around the 113.50/114 area - Westpac

According to Robert Rennie, Research Analyst at Westpac, yield spreads continue arguing for further gains in USD/JPY; the same in terms of risk sentiment etc. too.

Key Quotes

“The ongoing threat of risk aversion from e.g. North Korea/ Iran/ US politics etc. will likely continue capping the upside in and around the 113.50/114 area at least in the near term.”

“However, we remain of the view that there is ample room for the US$ to rally as we move into the end of the year.”

“Thus we stick with our medium term upside bias on assumption that US data momentum will build into end year, that we will see enough momentum on the budget/ tax bill to support the US$ yet further and that the Fed chair announcement adds a bit of weight to the above too. We shift our one week bias to up on the above too.”