USD/JPY: 3 Reasons For Fuhrer Strength Towards 116 In Q3 – BofAML

USD/JPY moved higher and stalled near 108. Can it extend its gains further? Here is the view from Bank of America Merill Lynch.

Here is their view, courtesy of eFXdata:

Bank of America Merrill Lynch Research discusses USD/JPY outlook and maintains its bullish bias on the pair targeting more upside towards 112 in Q2 and 116 in Q3.

“We maintain our view that the USD will strengthen because (1) growth momentum is diverging between the US and other regions; (2) the FRB is taking an increasingly hawkish stance; and (3) corporate repatriation (return of overseas profits to the home country) flows have turned upward. Also, our concern about a trade war is not as strong as that of some other market participants.

There is an emerging risk that domestic politics will hinder the rise of USD/JPY, but once that risk is factored in, the USD/JPY rate should find a solid floor, allowing domestic flows and the global macroeconomic environment to take over as the main drivers of forex rates, so we maintain our forecast that USD/JPY will rise to over 115,” BofAML argues.

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