15 Dec 2015
USD/JPY: mixed outlook before FOMC - Scotiabank
FXStreet (Guatemala) - Eric Theoret, CFA, CMT FX Strategist at Scotiabank explained that the broader market tone remains a primary risk for JPY, as we consider its ongoing vulnerability to haven-driven gains in periods of turmoil.
Key Quotes:
"Options prices are showing signs of stabilization, suggesting a potential limit to the recent turn in demand for protection against JPY gains (USD/JPY decline)."
"JPY appears vulnerable to a turn as we consider the recent divergence from fundamentals and the U.S.-Japan 2Y yield spread that currently implies a USD/JPY level around 125.00. As such, we maintain a focus on downside risk in USD/JPY but highlight the potential for swift gains in the event of a stabilization in the broader tone. Domestic risk is limited ahead of the BoJ later this week. "
Key Quotes:
"Options prices are showing signs of stabilization, suggesting a potential limit to the recent turn in demand for protection against JPY gains (USD/JPY decline)."
"JPY appears vulnerable to a turn as we consider the recent divergence from fundamentals and the U.S.-Japan 2Y yield spread that currently implies a USD/JPY level around 125.00. As such, we maintain a focus on downside risk in USD/JPY but highlight the potential for swift gains in the event of a stabilization in the broader tone. Domestic risk is limited ahead of the BoJ later this week. "