Currency investors should consider buying USD/JPY this week, advises Morgan Stanley in its weekly FX pick to clients.
"We recommend buying USD/JPY with a target of 117.00 and a stop at 110.50. Our ARIA indicator points to stronger February US economic data. Should this materialize as we expect, US yields are likely to move higher, attracting capital from the rest of the world.
Meanwhile in Japan, JGB yields are at historically unattractive levels, both in absolute terms and volatility adjusted. Consequently, as we head into the start of the new fiscal year, we expect there are likely to be increased outflows from Japan toward the United States," MS says as a rationale behind this call.
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