12 May 2015
USD/JPY: Sense of déjà vu - DB
FXStreet (Bali) - Taisuke Tanaka, Strategist at Deutsche Bank, notes that USD/JPY will continue to be supported over the next several months by buying on dips by Japanese investors.
Key Quotes
"Recent USD/JPY developments give a sense of déjà vu. Last year, the US economy, affected by a severe cold snap and other one-off factors, stalled in 1Q and remained slow in 2Q, causing the USD/JPY to stagnate. However, US indicators trended higher after 3Q, and the USD/JPY appreciated."
"The USD/JPY has been notably robust from a supply/demand perspective. Financial markets have broadly experienced corrections in past few weeks. This has sparked an unwinding of existing positions like stock and bond longs, oil shorts and, in forex markets, USD longs and EUR, JPY and some EM shorts."
"Still, the USD/JPY has remained firm at around ¥120 despite the corrective market during the thin trading in the Golden Week holiday. This is due to dollar purchasing by Japanese pensions and lifers and importers and overseas direct investment. The unwinding of speculative yen shorts by overseas investors was absorbed by dollar purchasing on the Japanese side."
"We believe the USD/JPY will continue to be supported over the next several months by buying on dips by Japanese investors. When US indicators get firmer through 3Q, overseas speculators should have leeway to rebuild substantial USD/JPY longs."
"We recommend buying the USD/JPY carefully on weakness as Japanese pensions do, taking profit partly in trading manner of range-bound market around ¥120, and maintaining the rest of the longs while awaiting the restart of the USD/JPY uptrend."
Key Quotes
"Recent USD/JPY developments give a sense of déjà vu. Last year, the US economy, affected by a severe cold snap and other one-off factors, stalled in 1Q and remained slow in 2Q, causing the USD/JPY to stagnate. However, US indicators trended higher after 3Q, and the USD/JPY appreciated."
"The USD/JPY has been notably robust from a supply/demand perspective. Financial markets have broadly experienced corrections in past few weeks. This has sparked an unwinding of existing positions like stock and bond longs, oil shorts and, in forex markets, USD longs and EUR, JPY and some EM shorts."
"Still, the USD/JPY has remained firm at around ¥120 despite the corrective market during the thin trading in the Golden Week holiday. This is due to dollar purchasing by Japanese pensions and lifers and importers and overseas direct investment. The unwinding of speculative yen shorts by overseas investors was absorbed by dollar purchasing on the Japanese side."
"We believe the USD/JPY will continue to be supported over the next several months by buying on dips by Japanese investors. When US indicators get firmer through 3Q, overseas speculators should have leeway to rebuild substantial USD/JPY longs."
"We recommend buying the USD/JPY carefully on weakness as Japanese pensions do, taking profit partly in trading manner of range-bound market around ¥120, and maintaining the rest of the longs while awaiting the restart of the USD/JPY uptrend."