Brent Crude Price Analysis: Citi’s Crucial Insight Reveals USD/JPY Support Above Key Average - MEXC

What the desk is arguing

Citi's analysis of Brent crude prices reveals an indirect support level for USD/JPY above a key moving average, likely the 50-day or 200-day MA. The argument suggests that oil price dynamics are providing a floor for the dollar-yen pair, with the correlation between crude and USD/JPY strengthening recently due to inflation and rate expectations.

This thesis challenges the view that USD/JPY is primarily driven by rate differentials, instead highlighting a commodity channel. However, the causal link remains tenuous, and the desk may be overstating the oil impact on a G10 FX pair.

Where it sits in our coverage

Our consensus target for USD/JPY is 147.5 for Dec26, with a wide spread of 24 figures (140-164). The current spot at 157.00 suggests most firms expect yen appreciation, but JPMorgan's bullish USD target of 164 indicates a stark divergence. Citi's view of support above a key average aligns more with the bullish USD camp, but their reliance on crude rather than rates is novel.

Specific firm targets for Dec26: - JPMorgan: 164.00 (bullish USD) - Goldman Sachs: 148.00 (bearish USD) - Morgan Stanley: 140.00 (strongly bearish USD)

These extremes highlight the dispersion, with the median at 147.5 but JPMorgan far on the other side.

How other firms see it

Most firms are bearish USD/JPY, with Morgan Stanley (140), Deutsche Bank (143), and MUFG (146) targeting significantly lower levels. Their view is contrary to Citi's implied support from oil, as they expect yen strength from BoJ normalization.

JPMorgan stands alone with a 164 target, directly aligned with the idea that USD/JPY has support. However, their rationale is rate differentials, not crude. Goldman Sachs and Barclays (both 148-149) are moderately bearish, likely dismissing the oil channel.

In summary, Citi's crude-USD/JPY link is an outlier; most firms base their outlook on monetary policy, not commodities.