USD/JPY will overshoot regardless of whether the BoJ makes further adjustments – SocGen

The biggest over-shooter in FX is the Yen. Kit Juckes, Chief Global FX Strategist at Société Générale, thinks USD/JPY 115 is a reasonable target.

Buying into Yen weakness

“A 20-year regression of USD/JPY against the 5-year US/Japanese yield spread would suggest ‘fair value’ is 118 now, and given the tendency to overshoot, it’s more than a little tempting to conclude USD/JPY 115 is a reasonable target. Even if the BoJ meeting on Wednesday only tells us (say) that they will announce the outcome of their review of the changes they made to yield curve control, in due course!”

“I think YCC has had its day, because it now has a target on its back. That may, before we’re done, cause an overshoot in USD/JPY to the downside. For now, though, we like buying into Yen weakness, so we’ll wait and see if the BoJ disappoints bulls enough on Wednesday to deliver attractive entry levels.”