USD/JPY: Risk aversion dips should be limited - Westpac

Robert Rennie, Research Analyst at Westpac explains that they have stuck with the view that risk aversion dips should be limited to the April/ June lows i.e. mid to late 108s and that theme has worked well for now after a very strong test earlier in the week.

Key Quotes

“To be sure, given the very uncertain near term outlook for the US debt ceiling/ appropriations/ political situation, it’s hard to see a compelling argument for an aggressive bounce in USD/JPY.”

“However, even with gold above $1300, it is worthy of note that USD/JPY has held 108.50 and recovered.”

“Thus we tweak last week’s bias/ directional views to flat near term followed by a more positive outlook for USD/JPY as we move into Q4 on better US data/ increased Fed pricing. All this assumes of course that we do start to see some momentum on the debt ceiling/ appropriations bills as Congress returns next week.”