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Westpac contemplates “A brief-term JPY alternative amid long-term headwinds?”
In abstract from the observe:
A textbook case for a fast USD/JPY reversal appears to be growing.
- The pair has been spinning its wheels between 150-151 lately, whilst
the hawkish repricing in US charges has misplaced momentum. - At 4.15-4.35%,
long run US yields are extra appropriately calibrated for a bumpier
disinflation glidepath and three% progress, than they have been in the beginning of the
yr. - Fed fund expectations will not be as clearly skewed relative to the
Fed’s dots both. - The “no touchdown” narrative has legs, however it’s not
clear circumstances are ripe for both Fed officers or markets to
significantly ponder pricing simply -50bp or -25bp in Fed cuts this yr.
On the JPY-leg, Q2 BoJ price hike bets are solidifying, and JPY
intervention threat lurks at greater ranges.
- There’s absolutely higher worth
promoting USD/JPY into 151 as a short-term commerce. - However we now have a tough time
seeing USD/JPY buying and selling sustainably decrease, say sub-146, as a consequence of ongoing
structural JPY headwinds.
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Appears like a technical roll over to me, yeah:
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