Synopsis:

Goldman Sachs adjusts its USD/JPY forecasts downward but maintains an upward trajectory, citing resilient US growth, continued Fed patience, and gradual BoJ hikes. While the outlook for higher USD/JPY remains intact, softer US data could shift the balance in favor of the yen.

Key Points:

1️⃣ Revised USD/JPY Forecasts 📊

• 3-month target: 154 (previously 160)
• 6-month target: 155 (previously 161)
• 12-month target: 156 (previously 162)

2️⃣ USD Carry Advantage Remains 💵

• The Fed is expected to remain patient, keeping US rate differentials supportive.
• Elevated USD carry still favors an upward trend for USD/JPY.

3️⃣ Gradual BoJ Hiking Limits JPY Upside 🇯🇵

• The BoJ is expected to continue hiking, but only at a measured pace.
• This reduces the likelihood of aggressive yen appreciation.

4️⃣ Key Risk: US Growth Softening 📉

• If US economic data weakens significantly, the Fed outlook could shift.
• This would allow for more yen strength and a potential deviation from the current forecast path.

Conclusion:

Goldman Sachs trims its USD/JPY projections but still expects the pair to rise gradually. The outlook remains bullish on the back of US economic resilience and yield differentials, though weaker US data could open the door for yen appreciation.