USD/JPY: Downside appears to be limited - Westpac

Robert Rennie, Research Analyst at Westpac, suggests that they have stuck with the view that the downside for USD/JPY appears to be limited on the basis that the market is under-pricing the Fed (we expect taper Sep and hike Dec) and strong data momentum.

Key Quotes

“However, North Korea remains a very potent risk as does domestic politics and with gold still holding above $1325, the risks remain that we see USD/JPY probing below 108.50.”

“Thus we stick with last week’s directional bias – flat near term followed by a more positive outlook based on Fed pricing and the assumption that the debt ceiling/ appropriations bills have now been addressed as a market issue.”