Currency analyst

USD/JPY near-term forecasts

Since June the market is trying to break the resistance line at 100 level. There were at least four attempts to do so, but all in vain. It seems that this shield is unpierceable.

What’s more surprising is that all these failures to break the support happened on the back of recent disappointments regarding the outcome of long-awaited central bank meetings, where the Fed’s indecision to hike the interest rates or BoJ’s inventive monetary policy pressured the USD/JPY downwards. Who knows, maybe the imminent US elections will start the ball rolling. Meanwhile, we hardly can expect any changes from the USD/JPY pair, at least, during further two weeks. USD/JPY will continue consolidating, then, there should be a decisive change of the trend.

It’s more than likely that the pair will rise in near-term. From recent data releases we can conclude that Japan’s economy doesn’t perform really well. Consumer spending numbers we had a chance to observe declined, while inflation indicators remained in negative territory. The Tankan indices published on Sunday, did not show us any improvements in manufacturing sector. On contrary, the US statistics brings us good news: consumer confidence came out at the highest since 2007, the production indices have increase since summer, final GDP was slightly better than it had been expected.

For any further confirmation of our forecast, let’s look at the bets of some big stakeholders.

Société Générale is in line with our bullish expectation; it is long USD/JPY from 100.30. The bank explains its position by the BoJ’s decision to target 10-year JGB yields at about zero, adding the yield curve control to its present Quantitative and Qualitative easing.  

Morgan Stanley as its colleagues doesn’t expect the yen to rise in the nearest future. According to its recent forecast, the steady 100 and 102.50 levels will be key to see which way USD/JPY decides to go further.

Goldman Sacks gives us more clues on the further USD/JPY movement. It believes that USD/JPY may reach 108, 110 and 115 marks in 3-, 60- and 12-months, respectively. It finds the BoJ’s decision to shift to yield targeting is clear-sighted; the market is willing to punish the BoJ’s incrementalism; any slack, any sign that the BoJ has given up on its easing will result in USD/JPY move below 100, threatening to bring to naught all progress under Kuroda’s rule. 

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