Robert Rennie, analyst at Westpac, suggests that they have stuck with a more negative bias for USD/JPY for the last few weeks on the basis of the potential for multiple rate cuts from the Fed, with the first of those week after next.

Key Quotes

“The recent run of data “substantially reduces the odds that the Fed is dragged into a larger easing cycle beyond a couple of tactical insurance cuts to help inoculate the economy”.”

“Thus we are less inclined to play for significant downside for USD/JPY in the near term. It would take further deterioration in trade relations between the US and China; a sharp selloff in risk sentiment; and/ or no signs of agreement on the US Government debt ceiling to push USD/JPY lower.”

“The risks of one/ several of those outcomes developing in August will probably rise thus we maintain a negative bias for the 1 and 3 month views, though shift back to a neutral bias on the week. Strength up to 108.50 a sell.”



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