What the desk is arguing
The desk posits that the recent drop in USD/JPY reflects a combination of intervention fatigue and persistent bearish sentiment towards the yen. The timing of this decline, occurring during a Japanese market holiday, suggests that traders may be capitalizing on reduced liquidity to push the pair lower. Per the full note source, the MOF's interventions have become less effective as the yen faces overwhelming fundamental headwinds.
The USD/JPY had approached the 158.00 level before this drop, indicating that market participants were testing the upper bounds of the pair. The desk emphasizes that the MOF's previous interventions have not yielded lasting effects, as evidenced by the recent price action, which shows a clear rejection of higher levels.
Where it sits in our coverage
Our consensus target for USD/JPY is 1.075, with a range from 1.04 to 1.12. Notable firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26) - citi: 1.12 (Mar26)
This view aligns with jpmorgan, which anticipates a stronger USD/JPY, while bofa presents a more bearish outlook, sitting at the lower end of the consensus range. The desk's call is positioned near the upper bound of the spread, indicating a more optimistic view on the pair's trajectory compared to some peers.
How other firms see it
Firms aligned with a bullish outlook on USD/JPY include jpmorgan and citi, both of which expect the pair to trend higher in the coming months. Conversely, bofa holds a contrary stance, projecting a weaker yen against the dollar.
Traders should also monitor related pairs such as EUR/JPY and AUD/JPY, as movements in these currencies may reflect broader sentiment towards the yen and influence USD/JPY dynamics.
What the calendar says
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