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3 Jun 2015
USD/JPY: To remain in low-mid 120's - JPM
FXStreet (Guatemala) - Analysts at JP Morgan explained that their forecast still shows USD/JPY in the low to mid-120s for the next year.
Key Quotes:
"....Though subject to inevitable spikes around US economic and/or Fed optimism."
"This flat-ish profile is admittedly tame for a pair as notoriously volcanic as USD/JPY, but reflects a few considerations."
"These include: (1) the yen’s extreme cheapness on a real effective exchange rate basis, as it trades two sigmas below its longterm average; (2) the recovery of Japan’s current account surplus to about 3% of GDP and the minimal prospects for US-Japanese spread widening during this Fed cycle, since yen bear markets typically require quite wide spreads and/or a worsening of Japan's trade position; and (3) USD/JPY's current overvaluation – it is too strong – in standard models relating the pair to cyclical factors like rate spreads and structural ones like the current account balance."
Key Quotes:
"....Though subject to inevitable spikes around US economic and/or Fed optimism."
"This flat-ish profile is admittedly tame for a pair as notoriously volcanic as USD/JPY, but reflects a few considerations."
"These include: (1) the yen’s extreme cheapness on a real effective exchange rate basis, as it trades two sigmas below its longterm average; (2) the recovery of Japan’s current account surplus to about 3% of GDP and the minimal prospects for US-Japanese spread widening during this Fed cycle, since yen bear markets typically require quite wide spreads and/or a worsening of Japan's trade position; and (3) USD/JPY's current overvaluation – it is too strong – in standard models relating the pair to cyclical factors like rate spreads and structural ones like the current account balance."