USD/JPY: Japanese politics a downside risk factor - Danske Bank

Matías Salord FXStreet

Analysts at Danske Bank, expect political uncertainty in Japan to rise and likely to weigh on the USD/JPY pair. Over the medium term, they see the pair in the range 110-115.

Key Quotes:

“Concerns about the Trump administration’s protectionist agenda and the case for higher inflation in the US also represent downside risks to USD/JPY.”

“USD/JPY remains highly correlated with the 10Y US treasury yield and the combination of a neutral speculative JPY positioning and higher US 10Y yields is likely to remain a supporting factor for USD/JPY.

“Political uncertainty in Japan is likely to weigh on USD/JPY over the summer ahead of the Liberal Democratic Party’s (LDP) leadership election in September, and we expect USD/JPY to trade within the 108-111.40 in the coming months targeting 110 in 1-3M.”

“ Over the medium term, we expect USD/JPY to remain underpinned by the continued global growth outlook and Fed-BoJ divergence, and we expect the cross eventually to settle in the 110-115 range in 6-12M targeting 112 in 6-12M.”

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

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