Goldman cuts yen forecast to 165, among most bearish on Wall Street
At a Glance
Goldman Sachs' fresh forecast of a weaker yen, with a revised target of 165 for USD/JPY by June 2024, highlights market sentiment swinging firmly toward further depreciation of the currency. As noted in their report, market-implied probabilities now estimate a 72% chance for this level, emphasizing that trader positioning has aligned with forecaster expectations for the yen's continued weakness. There exists a significant divergence from fair value models, indicating persistent pressures driven by US-Japan rate differentials and Japan's fiscal challenges. Coupled with high hedge fund short positions, this setup suggests a potential one-way market dynamic unless there are drastic shifts in monetary policy from either the Federal Reserve or the Bank of Japan source.
Key Takeaways
- 01Goldman Sachs forecasts USD/JPY at 165 by June 2024, aligning with a 72% market-implied probability.
- 02High hedge fund short positioning suggests a strong bearish sentiment towards the yen.
- 03Continued divergence from fair value indicates that stabilizing interventions will likely be ineffective.
- 04The outlook for the yen is heavily influenced by US-Japan interest rate differentials and Japanese fiscal pressures.
Full Analysis
What the desk is arguing
The desk believes Goldman's aggressive target for USD/JPY underscores a pronounced bearish outlook for the yen amidst prevailing macroeconomic conditions. Per the full note, the expectation is reinforced by a historical peak in hedge fund short positioning and the outlook for US-Japan rate differentials.
Goldman Sachs has raised its three-month USD/JPY forecast to 162 and its six-month target to 163, reflecting their outsize view on short-term carry trade dynamics. The market context suggests that intervention efforts from the Bank of Japan are likely to be only temporary, failing to alter the underlying trend of yen depreciation.
Where it sits in our coverage
Currently, consensus targets for USD/JPY suggest a March 2026 average of 155.00, with projections from firms varying: - Citi: 155.00 (Mar26) - Goldman: 155.00 (Mar26) - MUFG: 153.00 (Mar26)
This view sits at the upper bound of broader institutional expectations, particularly when considering the more conservative targets from firms like Citi and MUFG, both anticipating a weaker currency than Goldman's forecast.
How other firms see it
Firms aligned with Goldman's view largely reflect a bearish sentiment towards the yen, including Goldman, Citi, and MUFG. Conversely, firms like Stanchart and Morgan Stanley maintain more conservative targets, suggesting a slower view on yen depreciation or even potential stabilization.
The trajectory of USD/JPY will also impact and be impacted by the Eurozone's monetary policy stances, creating indirect interactions with pairs such as EUR/USD and GBP/USD. Watch for the implications of consistent rate adjustments from the Federal Reserve in relation to this USD/JPY dynamic.
Market Implications
Watch for movements in USD/JPY around the psychological barrier of 165, as well as potential shifts in sentiment driven by upcoming Fed announcements. The prevailing hedge fund positioning signifies a market ready for either abrupt movement or sustained trends, hinging heavily on monetary policy updates.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2027 |
|---|---|---|
Goldman Sachs | Bearish | 1.1200 |
UOB | Neutral | 1.1450 |
Citi | Bearish | 1.1000 |
From the original
Goldman's shift to one of the most bearish USD/JPY calls on the Street, alongside a market-implied probability of around 72% for 165 by next June, suggests positioning and forecaster consensus are increasingly aligned around further yen weakness rather than a reversal, even with
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