USD/JPY poised to test 112.00 in 6-month – Danske Bank

Morten Helt, Senior Analyst at Danske Bank, sees spot gathering upside momentum to the 112.00 area in the medium term.

Key Quotes

“USD/JPY remains highly correlated with the 10Y US treasury yield and the combination of neutral speculative JPY positioning and higher US 10Y yields could be a supporting factor for USD/JPY near term. The cross looks increasingly overbought technically, and we reckon that further rally in USD/JPY requires that the sell-off momentum in the US fixed income market is sustained, which our rate strategists do not expect. We have thus lifted our 1M and 3M forecasts to 109 (107 previously) and 110 (108), respectively”.

“Over the medium term, we expect USD/JPY to remain underpinned by continued global growth outlook and Fed-BoJ divergence, and we expect the cross to eventually settle in the 110-115 range in 6-12M. We now target the cross at 112 (110) in 6M and 112 in 12M”.