USD/JPY: what do the banks think?
USD/JPY strengthened rising above 117.05 even though the announcements made by Prime Minister Abe about the snap elections and the delay in take hike were widely expected. The pair was driven up by the results of the Bank of Japan’s meeting: governor Kuroda now has a clear majority supporting the record easing presented a month ago, as the board today voted 8-1 compared to 5-4 a month ago.
Analysts at BNP Paribas remain broadly bullish, but think that USD/JPY will be tricky to trade in the run-up to the election. The specialists say that now the overbought pair is at the levels which are not very good for longs.
Westpac says that the combination of upcoming Japanese election risks, confirmation of a technical recession and the postponement of the consumption tax rise may leave markets confused, and USD/JPY in the short term may range trade around the 116.00/50 area. However, USD/JPY looks set to continue the move higher into year end. A break above 117.50 would target 120.
Analysts at Nomura say that the trend is still clearly directed upwards, so to confirm that the bullish impulse from the 105 yen levels is over the bears need either a reversal pattern or a 5-wave decline. The levels to watch on the downside are 116.00, 115.00 and 113.85. SEB Bank notes that now USD/JPY is trading at the top of the rising wedge (117.50). The next resistance is at 117.90/118.05.