JPY: Breaking Point & Yentervention Risks - TDS
Research Team at TDS, suggests that the USD/JPY has traded decisively
below the key support/ psychological level of 110 and for the near term,
the balance of risk remains skewed to the downside.
Key Quotes
•
“Concerns over intervention risk may grow, but we think this is
politically very difficult to do ahead of the G7 meeting held in Japan
next month. We do not think 110 represents a major line in the sand for
the BoJ. From our perspective, the recent appreciation in JPY is not
disorderly enough to instigate currency intervention.
• We
remain short USD/JPY as we shift to our stretch target of 105. Ahead of
this, we see significant support at 106.57 and around the 105.20/50
zone, which could see us take profit a little before reaching this goal.
We move our trailing stop down to 110.75 as the 110.67 breakdown level
now represents crucial resistance to the topside.
• Thinking
more broadly, however, we think the correction in USD/JPY off last June’s
cycle highs (125.86) may be drawing to a close. Momentum and flows may
certainly drag spot lower from here, but we are increasingly moving
neutral this pair from a medium-term perspective.
• With US
equities outperforming their Japanese counterparts, these could be
vulnerable to repatriation and profit taking by Japanese investors as
risk aversion there has risen. FX market positioning has also
deteriorated considerably for JPY bulls.”
(Market News Provided by FXstreet)