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May 03 - 10:55 AM

BofA: Caution on Buying USD/JPY Dips; Patience for Better Entry Points

By eFXdata  —  May 03 - 09:30 AM

Synopsis:

Bank of America advises investors to exhibit patience in buying dips in USD/JPY, highlighting recent large-scale interventions by Japanese authorities and recommending waiting for more favorable risk-reward levels closer to the low 150s.

Key Points:

  • Intervention Size: Market speculation suggests significant intervention by the Ministry of Finance (MoF) on April 29 and May 1, which may approximate the total intervention scale seen in 2022. Exact figures will be confirmed by the end of May.

  • Structural Outflows: BofA notes that ongoing structural outflows from Japan are expected to keep the yen weaker over an extended period, suggesting a long-term downtrend in JPY despite recent interventions.

  • Investment Strategy: While the temptation to buy dips might be strong, BofA recommends investors wait for USD/JPY to approach lower levels around the 150s for a better risk-reward scenario. This cautious approach accounts for potential further interventions that could affect short-term price movements.

Conclusion:

In light of recent substantial interventions in the currency market by Japanese authorities, and the underlying structural pressures expected to weaken the yen, Bank of America advises a strategic wait for more advantageous buying opportunities in USD/JPY

Source:
BofA Global Research

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