“The JPY may be the best performing G10 currency on a 1 day view, but the uptrend that has dominated USD/JPY since March remains intact. The strength of the USD this year has been built on the back of the Fed’s progressive policy tightening and the continued strength of the US economy. However, we maintain that in environments of severe investor stress or souring US fundamentals that the JPY is likely to outperform the USD. In 2019 we expect the JPY to win back ground vs. the USD and see scope for USD/JPY to move below the 110 level by the end of next year.”
“The USD’s outperformance of the JPY this year has been built around interest rate differentials. However, we anticipate that 2019 will bring a souring in the outlook for the USD. This could open the way for a move lower for USD/JPY.”
“Our central view is that USD/JPY will trade close to 110 on a 12 month view, but a worsening in either the outlook for world growth or the geopolitical backdrop suggest there is downside risk to this view.”
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