FXStreet (Barcelona) – Jens Nordvig, FX Strategist at Nomura, explains that USD/JPY downside risks stands limited and near-term range-play might be seen, while second half of 2015 will see the pair resume its upside rally.
Key Quotes
“With the FOMC out of the way, we have the BOJ coming up on Friday when Governor Kuroda’s press conference is likely to come under scrutiny with regard to his comments on JPY last week. Even though Governor Kuroda already sounded more balanced at his parliament appearance on Tuesday, the market will pay strong attention to Governor Kuroda’s comment on JPY valuation.”
“We expect Governor Kuroda to continue downplaying the importance of the REER again at the press conference on Friday, showing a more balanced view on JPY weakness. Japanese policy makers, including BOJ Governor Kuroda, are unlikely to want to see rapid JPY weakness, but they are likely fine with gradual JPY weakness. Thus, we do not see much downside risk in USD/JPY.”
“At the same time, the USD/JPY’s reaction to Governor Kuroda’s downplaying his this Tuesday was also relatively muted, suggesting range trading of USD/JPY is more likely for now, but we expect USD/JPY appreciation to continue into the second half of 2015.”
“However, we judge near-term upside risk is now smaller after the Kuroda shock and FOMC, and we judge it is reasonable to book profits from USD/JPY long positions, while we keep exposure for near-term range trading, in a form of a USD/JPY 1-month DNT structure (121.00-125.50).”
“We still judge USD/JPY is more likely to resume appreciation into the H2 this year and look for a better entering point and timing for the renewed USD/JPY long positions.”
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