USD/JPY: Potential for a little more upside - Westpac

USD/JPY has potential for a little more upside, but should find the 114.40- 115.00 area sticky, according to Imre Speizer, Research Analyst at Westpac.

Key Quotes

“Certainly if geopolitical tensions (via North Korea) are heightened, then the downward reversal could be sharp.”

“JGB yields are likely to continue their steady move higher as the BoJ continues its ‘stealth taper’ move. Quite why the market has not reacted to this is a source of confusion for us. The July 19-20 meeting is a perfect opportunity for the BoJ to clear up the current confusion. On the one hand it is targeting an ¥80tn pace of increase in JGB holdings; on the other it is buying just ¥20tn (3m ann basis). With the DXY on the back foot, we have to stay neutral on USD/JPY until the confusion is cleared up. Dips below 110 remain a buy though.”