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Nov 25 - 05:55 AM

USD/JPY - COMMENT-This May Be Sweet Spot To Bet On USD/JPY Rises

By Jeremy Boulton  —  Nov 25 - 04:05 AM

USD/JPY has met the target for a minimum technical correction of the rally fuelled by U.S. and Japanese monetary policy, it may be the perfect spot to bet it rises further.

Between April and October the combined power of the Bank of Japan and Federal Reserve policies supported a USD/JPY rise from 114.65 to 151.94.
Since then it has taken massive BOJ intervention to drive the pair back down to 137.70 - which is the target for a minimum technical correction - while the central bank polices underpinning USD/JPY have not changed.

The gulf in interest rates means investors holding dollars receive an enormous return, equivalent to 700 points annually, and with BOJ determined to retain super easy policy when U.S. interest rates are seen rising further, support may grow.

In contrast, the apparent success of intervention - that has driven out speculative bets previously restraining the rally - should see it curtailed.
While BOJ may try to cap further strength, there's a lot of topside scope and so a good chance the technical uptrend sees favourable FX movement adding to interest rate returns.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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