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5 May 2016
USD/JPY points south short-term – Westpac
Strategist at Westpac Robert Rennie sticks with his bearish view on the pair for the upcoming week.
Key Quotes
“Last week we shifted from a bullish USD/JPY weekly bias to a bearish weekly bias, the catalyst for this of course being the ‘shock’ no change from the BoJ”.
“We remain confused by the outcome - Japan officially moved back into deflation in April, the BoJ FY16 inflation forecast was revised down to 0.5% from 0.8% in Jan and 1.4% in October, and the forecast for reaching 2% inflation was pushed back to some time in FY 2017 (from first half FY17 in January and second half FY16 in October)|”.
“Given that Kuroda’s 5yr term ends in April 2018, the risks are he never sees his objective being met after 5yrs of aggressive QE”.
“So why not cut rates further? We remain of the view the BoJ will announce more QE, but the timing has been pushed back to June/ July to assess the impact of negative deposit rates”.
“The next key focus will be the G7 leaders’ summit May 26/27 – and no growth plan could push USD/JPY down towards 100/103. We stick with a bearish view for another week, though are wary of payroll risks Friday”.
Key Quotes
“Last week we shifted from a bullish USD/JPY weekly bias to a bearish weekly bias, the catalyst for this of course being the ‘shock’ no change from the BoJ”.
“We remain confused by the outcome - Japan officially moved back into deflation in April, the BoJ FY16 inflation forecast was revised down to 0.5% from 0.8% in Jan and 1.4% in October, and the forecast for reaching 2% inflation was pushed back to some time in FY 2017 (from first half FY17 in January and second half FY16 in October)|”.
“Given that Kuroda’s 5yr term ends in April 2018, the risks are he never sees his objective being met after 5yrs of aggressive QE”.
“So why not cut rates further? We remain of the view the BoJ will announce more QE, but the timing has been pushed back to June/ July to assess the impact of negative deposit rates”.
“The next key focus will be the G7 leaders’ summit May 26/27 – and no growth plan could push USD/JPY down towards 100/103. We stick with a bearish view for another week, though are wary of payroll risks Friday”.