USD/JPY seen at 114.00 in 3-month – Danske Bank

Morten Helt, Senior Analyst at Danske Bank, believes the pair could climb to the 114.00 area in the near term.

Key Quotes

“While the combination of strong global PMIs and postponement of US debt limit risk is good for risk appetite and has improved the prospect of a higher USD/JPY in the near term, geopolitical uncertainty related to North Korea still represents a substantial downside risk and will continue to weigh on the cross”.

“According to the latest IMM data, non-commercial JPY positioning is now back in stretched short territory, suggesting risks are tilted to the downside for USD/JPY from a positioning point of view”.

“We still expect USD/JPY to trade within the 108-111 range near term targeting 111 in 1M and 114 in 3M. Fundamentally, we still see a case for a higher USD/JPY over the medium term horizon, driven by Fed-BoJ divergence, higher global yields (eventually) supported by global growth recovery and portfolio outflow out of Japan. We target USD/JPY at 116 in 6-12M”.