7 Dec 2015
USD/JPY may not simply exhibit bullish reaction in the short-run – Deutsche Bank
FXStreet (Delhi) – Taisuke Tanaka, Research Analyst at Deutsche Bank, suggests that a hike in US interest rates has already been discounted by the market, and the USD/JPY is therefore unlikely to simply exhibit a bullish reaction.
Key Quotes
“The differences in projected monetary policy between the US and Europe and the US and Japan in 2016 suggest a downtrend in the EUR/USD and an uptrend in the USD/JPY. However, as a result of excessive expectations by the market ahead of the ECB's decision to extend monetary easing last week, the EUR/USD's first reaction following the announcement was a sharp rebound. Many EUR bears’ positions were damaged, and the EUR/USD may for some period become less sensitive to expectations of a US rate hike next week.”
“Following the announcement of firm US employment data on 4 December, a rate hike by the Fed on 16 December is now also almost factored in. It is therefore no longer possible to forecast a definite bullish reaction by the USD/JPY, which is tied to US monetary policy.”
“However, in coming some months, we expect the EUR/USD to decline below parity and the USD/JPY to rise to high-120’s. As a result, we remain of the view that steadily dip-buying of the USD against the EUR and JPY will stay as an effective tactics.”
Key Quotes
“The differences in projected monetary policy between the US and Europe and the US and Japan in 2016 suggest a downtrend in the EUR/USD and an uptrend in the USD/JPY. However, as a result of excessive expectations by the market ahead of the ECB's decision to extend monetary easing last week, the EUR/USD's first reaction following the announcement was a sharp rebound. Many EUR bears’ positions were damaged, and the EUR/USD may for some period become less sensitive to expectations of a US rate hike next week.”
“Following the announcement of firm US employment data on 4 December, a rate hike by the Fed on 16 December is now also almost factored in. It is therefore no longer possible to forecast a definite bullish reaction by the USD/JPY, which is tied to US monetary policy.”
“However, in coming some months, we expect the EUR/USD to decline below parity and the USD/JPY to rise to high-120’s. As a result, we remain of the view that steadily dip-buying of the USD against the EUR and JPY will stay as an effective tactics.”