FXStreet (Edinburgh) – Analysts at JP Morgan reiterated the bullish perspective for USD/JPY.
Key Quotes
“The forecast still shows USD/JPY in the low to mid-120s for the next year, though subject to inevitable spikes around US economic and/or Fed optimism”.
“This flat-ish profile is admittedly tame for a pair as notoriously volcanic as USD/JPY, but reflects a few considerations”.
“These include: (1) the yen’s extreme cheapness on a real effective exchange rate basis, as it trades two sigmas below its long term average”;
“(2) the recovery of Japan’s current account surplus to about 3% of GDP and the minimal prospects for US-Japanese spread widening during this Fed cycle, since yen bear markets typically require quite wide spreads and/or a worsening of Japan’s trade position;”
“and (3) USD/JPY’s current overvaluation – it is too strong – in standard models relating the pair to cyclical factors like rate spreads and structural ones like the current account balance”.
(Market News Provided by FXstreet)