USD/JPY: Back to the 1980s
At a Glance
The desk believes that USD/JPY has entered a pivotal phase reminiscent of the 1980s, with the pair breaking above the 162 mark. This development reflects significant market positioning against the yen and increasing speculation regarding the Bank of Japan's potential intervention, particularly given Japan’s ongoing cost of living crisis. Notably, the BoJ had previously intervened around the 160 handle, prompting expectations for further action soon. Per the full note from ing-think, traders are weighing the timing of any intervention against upcoming US data releases that could further impact the dollar's strength.
Key Takeaways
- 01USD/JPY has crossed above 162, evoking comparisons to the 1980s volatility.
- 02Speculation intensifies around the timing of the BoJ's intervention amid cost of living pressures.
- 03Current consensus targets reflect a projection of stabilization towards lower levels by late 2026.
- 04Market positioning indicates a net short yen stance, but less extreme than during past intervention campaigns.
Full Analysis
What the desk is arguing
The desk is framing the dramatic rise in USD/JPY as a return to the volatility seen in the 1980s, suggesting that the Japanese yen is under significant pressure. As noted in the commentary from ing-think, with USD/JPY surpassing 162, traders are eagerly anticipating another round of intervention from the Bank of Japan, especially as the country grapples with inflationary pressures and rising import costs.
Evidence supporting this view includes the BoJ's recent sale of over $70 billion in April and May to defend the yen, which highlights the central bank's commitment to stabilizing the currency. Market positioning also indicates a net short yen stance, albeit less extreme than during the summer 2024 intervention period.
Where it sits in our coverage
Our current consensus targets for USD/JPY suggest a target of 148.0 by December 2026, with a range spanning from 149.0 to 160.3. Noteworthy per-firm targets include: - hsbc: Dec-26 target at 145.0 - jpmorgan: Dec-26 target at 164.0 - goldman: Dec-26 at 148.0
The desk's perspectives appear to diverge from the consensus, particularly as it anticipates more aggressive near-term interventions that may not align with current forecasts, which generally indicate a strengthening yen over a longer horizon.
How other firms see it
Firms such as hsbc and jpmorgan hold contrasting views; while hsbc leans towards further yen depreciation, jpmorgan is more optimistic about a return to stability. Meanwhile, others like goldman support a cautious approach, expecting slight recoveries.
The trajectory of USD/JPY will likely influence the unfolding dynamics in EUR/USD and GBP/USD, particularly as shifts in the BoJ's policy are observed. Watch these pairs closely for potential spillover effects.
What the calendar says
Currently, there are no high-impact events scheduled that could affect expectations preceding the next likely BoJ interventions, leaving traders to navigate the current technical landscape and speculative positions.
Market Implications
Traders should closely monitor USD/JPY around the 162 level, as any signs of BoJ intervention could lead to a rapid re-evaluation of the current bullish outlook on the dollar. Positioning could shift dramatically if upcoming events suggest a more hawkish stance from the Federal Reserve or immediate user commentary points in favor of the dollar.
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
Articles USD/JPY: Back to the 1980s 12:45 FX Japan United States Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download In breaking above the 2024 highs near 162, USD/JPY has returned to levels not seen since the 1980s. Traders continue to second-guess when