28 Jun 2013
Flash: Calm and higher CPI saw Yen decline again - Societe Generale
Fxstreet.com (Barcelona) - Kit Juckes, Global Head of Currency Strategy at Societe Generale notes that calmer markets and a higher Japanese CPI than expected saw the yen start falling again.
He thinks this is hugely supportive of his USD/JPY 110 end-year forecast, though he is not sure how he should be supposed to trade short term. He writes, “The story of 1995-2000 was that USD/JPY fell until US rates peaked, and then embarked on a long rally. Higher US rates with lower market volatility are the recipe for a rising dollar.” He would like to see USD/JPY in a 95-100 range from now till mid-August, before the next leg of the USD/JPY rally. He feels that the risk is that instead, we are going to take USD/JPY through 100 and re-test the highs of the move in early July. He adds, “We aren’t seeing the same dynamic in Europe though, where EUR/USD still meanders sideways. I’ll stick with long USD/CHF in Europe, but my patience could wear pretty thin pretty quickly.”
He thinks this is hugely supportive of his USD/JPY 110 end-year forecast, though he is not sure how he should be supposed to trade short term. He writes, “The story of 1995-2000 was that USD/JPY fell until US rates peaked, and then embarked on a long rally. Higher US rates with lower market volatility are the recipe for a rising dollar.” He would like to see USD/JPY in a 95-100 range from now till mid-August, before the next leg of the USD/JPY rally. He feels that the risk is that instead, we are going to take USD/JPY through 100 and re-test the highs of the move in early July. He adds, “We aren’t seeing the same dynamic in Europe though, where EUR/USD still meanders sideways. I’ll stick with long USD/CHF in Europe, but my patience could wear pretty thin pretty quickly.”