Short USD/JPY for target of 108 – Deutsche Bank

Analysts at Deutsche Bank are recommending to go short on USD/JPY pair for the target of 108, while entry level being 110.84 and maintaining a stop of 112.90 as their G10 trade idea of the week.

Key Quotes

“We expect falling US Treasury yields to push USD/JPY through the current support level and open up technical scope for further downside. The correlation with the ten-year nominal rate spread remains exceptionally strong at close to 100% over the past year, and the risk to US yields remains skewed to the downside with the FOMC likely to delay an announcement regarding the balance sheet and emphasizing concerns that inflation has disappointed for more than temporary reasons.”

“Political risks to the rate spread come from both countries. Congress hearings of White House advisors this week risk further escalation of the Russian affair while policy reform has ground to a halt. In Japan, Mr Abe’s questioning this week and the expected cabinet reshuffle next week could not be sufficient to allay growing concerns over his political longevity and thus the stability of Abenomics into 2018. Japanese weekend press showed his popularity ratings in further decline.”