USD/JPY: Political events a potential risk to the current 110-113 range - Danske Bank

Matías Salord FXStreet

According to analysts from Danske Bankt, the upcoming summit meeting between PM Shinzo Abe and US president Trump (expected around 25 September) represents a downside risk to USD/JPY and Japanese equity markets.

Key Quotes:

“We expect USD/JPY to continue trading mostly sideways in the near term, with risk appetite and yields on 10Y UST the main drivers. Political events, most notably a potential summit meeting between Abe and Trump, represent a downside risk if concerns about a US-Japanese trade war increase. Taking FX positioning and the overall fragile risk environment into consideration, we see little potential for a sustained rally in USD/JPY above July’s high at 113.17 in the near term. We see the cross within a 110-113 range in the coming months, targeting 112 in 1-3M.”

“Longer term, the BoJ’s monetary policy should remain supportive for USD/JPY, driven by widening US-Japan yield spreads and continued outflows out of Japan. We target 114 in 6-12M.”

“Concerns about the Trump administration’s protectionist agenda and the case for higher inflation in the US represent downside risks to USD/JPY. Chinese growth concerns and CNY depreciation could potentially weigh on Japan’s main growth engine- exports.”

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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