11 Jun 2015
USD/JPY expected to consolidate in the 122-125 range – Nomura
FXStreet (Barcelona) - FX Strategists at Nomura, offer their outlook for USD/JPY and the key reasons behind their view for stability in the pair.
Key Quotes
“First, USD/JPY has not been much influenced by the recent Greek developments over the last several months. Hence, even if there is an escalation (or resolution) in coming weeks, we think it will be of limited relevance to USD/JPY.”
“Second, even if there has been dramatic volatility in global rates markets, we have yet to see any outsized spillovers to global risk assets. This suggests that risk appetite will remain broadly unchanged. Importantly, risk sentiment among Japanese investors will remain high, supporting their portfolio shift away from risk-free assets to foreign assets (and supporting a gradual uptrend in USD/JPY).”
“Third, the June FOMC meeting next week is unlikely to be conclusive, as the data have been mixed, and the Fed will need more information to reach a firmer opinion about the likely timing of lift-off.”
“All told, we think both domestic and international factors favour a scenario of near-term consolidation in USD/JPY within the 122-125 range. We recommend having a USD/JPY 1-month range trading exposure in the form of double-no-touches (DNTs). Specifically, we recommend holding a 121-125.50 DNT (which cost around 15% of pay-out), and we allocate $100k for each position in our model portfolio.”
Key Quotes
“First, USD/JPY has not been much influenced by the recent Greek developments over the last several months. Hence, even if there is an escalation (or resolution) in coming weeks, we think it will be of limited relevance to USD/JPY.”
“Second, even if there has been dramatic volatility in global rates markets, we have yet to see any outsized spillovers to global risk assets. This suggests that risk appetite will remain broadly unchanged. Importantly, risk sentiment among Japanese investors will remain high, supporting their portfolio shift away from risk-free assets to foreign assets (and supporting a gradual uptrend in USD/JPY).”
“Third, the June FOMC meeting next week is unlikely to be conclusive, as the data have been mixed, and the Fed will need more information to reach a firmer opinion about the likely timing of lift-off.”
“All told, we think both domestic and international factors favour a scenario of near-term consolidation in USD/JPY within the 122-125 range. We recommend having a USD/JPY 1-month range trading exposure in the form of double-no-touches (DNTs). Specifically, we recommend holding a 121-125.50 DNT (which cost around 15% of pay-out), and we allocate $100k for each position in our model portfolio.”