Bank of America Merrill Lynch Global Research discusses USD/JPY outlook and adopts a structural bearish bias, expressing that via holding a short exposure* in its model portfolio. BofAML now targets USD/JPY at 105 by end of Q3, and at 101 by year-end.
"Our US Economics team subjectively estimates the odds of a recession as roughly 1 in 3, with their model of recession implying a lower 20% risk. In the recent release of our 21st Risk Management Survey, which is targeted toward corporates managing and hedging risks such as balance sheet and cash flow, nearly half of them expect the next recession in the US to start by the end of next year," BofAML notes.
"We expect USD/JPY to reach 101 by December 2019 as the Fed's dovish shift lowers the bar for rate cuts although our forecast assumes our scenario of the global equity market to peak out in 2H19 and head lower," BofAML adds.
*Recorded in eFXplus Orders