USD/JPY seen at 102.00 in 3-month – Danske Bank

Morten Helt, Senior Analyst at Danske Bank, expects the Japanese safe haven to lose ground towards the 102.00 area vs. the buck in a 3-month’s view.

Key Quotes

“In our main scenario, we expect the BoJ to disappoint relative to market pricing at the 21 September meeting, suggesting that USD/JPY is likely to trade lower in the very near term”.

“Given the market’s low expectations for further Fed rate hikes, short-term valuations and positioning, we expect JPY appreciation pressure to lose momentum, and in the absence of a sharp deterioration in risk sentiment and/or substantial declines in crude oil prices, we do not expect USD/JPY to break significantly below 100”.

“We target 101 in 1M and 102 in 3M. On a 3-12M horizon, we see USD/JPY in rage of 100- 105”.

“On the one side, the prospect of a monetary policy surprise (either from the BoJ or the Fed) is low and while underlying support for JPY stemming from fundamental flows is likely to remain intact, we see the effects diminishing as the yen is no longer undervalued”.

“Moreover, we expect the market to continue to price in a probability of a BoJ rate cut in the future, which will remain a supporting factor for the cross. We target USD/JPY at 104 in 6-12M”.