FX Convictions – Long USD versus JPY added

by: Roy Teo

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  • We have become bearish on the JPY versus the USD…
  • …as financial markets start to anticipate more BoJ easing in September…
  • …we have therefore added it to our conviction list…
  • …with a target of 107 and a stop loss set at 99.00
  • We keep HUF long versus EUR on our conviction list

 

160823-FX-Conviction-Long-USDJPY-call.pdf (236 KB)
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We have added long USD versus JPY to our conviction list

We have decided to add long USD versus JPY to our conviction list as we expect financial markets to start anticipating that the BoJ will increase monetary stimulus in the next monetary policy meeting on 21 September. Indeed over the weekend, BoJ Governor Kuroda said that there is sufficient chance for more easing in September and that there is room for deeper negative interest rates. However a rate cut has not been fully priced in by financial markets. JGB volatility has also declined to levels seen before the BoJ last cut interest rates earlier this year in January. Hence there is also room for the BoJ to increase their JGB purchases. Volatility expectations and the demand to hedge weakness in the JPY have increased recently. We expect the JPY to underperform as elevated speculative long JPY positions are unwound. Our short term target is 107 and we have placed a stop loss at 99.00, just below the this year’s low of 99.02 on 24 June.

 

1 Jun

 

 

We keep in place our HUF long versus EUR

We keep our HUF long versus EUR in our high conviction views in place. For more details please refer to our FX Convictions – Add HUF long versus EUR.

2 Jun